Inflation rises in August to 3.2%

The consumer prices index (CPI) for inflation grew to 3.2% in the 12 months to August 2021, largely thanks to food-related Government schemes, data from the Office for National Statistics (ONS) shows.

Food prices were driven down in August 2020 by the Government's eat out to help out scheme and the VAT cut in hospitality, creating a base effect difference with food prices seen in August 2021.

The ONS said this base effect partly explained the high inflation rate that surpasses the Bank of England's inflation target of 2%, adding "this effect is likely to be temporary".

Transport was the next biggest contributor to the rise in inflation (0.87%) alongside contributions from restaurants and hotels (0.65%), housing and household services (0.65%), and recreation and culture (0.28%).

Suren Thiru, head of economics at the British Chambers of Commerce, said inflation is on track to reach 4% by the end of 2021, which the Resolution Foundation agreed with.

He added:

"However, as supply chains adjust post-pandemic and demand moderates as Government support fades and fiscal policy tightens, inflation should drift back to close to target by Q4 2022."

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