Money markets are betting the Bank of England will increase interest rates to 6%, despite inflation falling to its lowest level since February 2022.
Higher interest rate expectations in the City have been triggered by underlying price pressures resisting tighter monetary policy.
Office for National Statistics figures yesterday revealed the rate of annual prices growth in Britain fell to 6.8% last month, the lowest reading since before Russia’s invasion of Ukraine and down from 7.9% in the previous month.
But services inflation, which the Bank monitors closely when making interest rate decisions, jumped to 7.4% from 7.2%, above its projection for July. Wages are also rising by 7.8%, the fastest pace since records began 22 years ago.
