UK Inflation Holds Steady at 3.8% as BoE Expected to Pause Rate Cuts

Britain’s inflation rate remained unchanged in August at 3.8 percent, the Office for National Statistics (ONS) reported on Wednesday, reinforcing expectations that the Bank of England (BoE) will keep interest rates steady this week.

The figure, matching July’s level and in line with analysts’ forecasts, comes after the BoE cut borrowing costs in August to 4 percent — the lowest in two and a half years. However, economists widely anticipate the central bank will hold rates on Thursday and for the rest of 2025.

The Labour government continues to face mounting economic challenges. Data last week revealed that GDP stagnated in July, while unemployment remained at a four-year high of 4.7 percent. Finance Minister Rachel Reeves admitted families are struggling and pledged to maintain strict spending controls as growth proves difficult ahead of November’s budget.

The BoE projects inflation could edge higher to four percent in September, double its target, prolonging the “higher-for-longer” rate environment. Rising food and fuel costs added pressure in August, despite a decline in airfares.

Meanwhile, international confidence in the UK received a boost as US tech giants like Microsoft and Google announced new investments, coinciding with President Donald Trump’s state visit.