UK inflation stays stuck at 3.8%, limiting Bank of England’s scope for cuts

United Kingdom (U.K.) inflation held at 3.8% in August, a reminder of sticky price pressures that could constrain the Bank of England’s ability to deliver further rate cuts this year.

The headline figure, released Wednesday by the Office for National Statistics, matched economists’ expectations. Core inflation eased slightly to 3.6% from 3.8% in July, reflecting softer airfare costs, though higher fuel prices and resilient food inflation offset that relief.

The print comes just weeks after the BoE trimmed its benchmark rate to 4% from 4.25% and forecast a possible peak of 4% inflation in September before easing through 2026.

“Sticky inflation is restricting the opportunity for a fourth rate cut by the BoE this year,” said Scott Gardner, investment strategist at J.P. Morgan-owned Nutmeg. “More progress is required on the inflation front to convince policymakers that a further cut is possible in the current environment.”

The pound slipped after the data, trading at $1.3637 against the dollar. Gilts were little changed.

Finance Minister Rachel Reeves acknowledged the pressure on households, saying many families still feel “the economy is stuck,” while reiterating the government’s commitment to easing the cost of living.

The BoE meets Thursday, though no policy move is expected. Markets remain divided over whether another cut could come in November.