British inflation defied expectations for a fall in August but property prices weakened further and the Bank of England's newest recruit signalled he was in no rush to raise interest rates. UK consumer price inflation held steady at 3.1 percent last month, more than a percentage point above target, after big rises in airfares and clothing prices offset easing fuel costs.
Martin Weale, the newest member of the central bank's monetary policy committee, said he had been surprised by the strength of inflation. But he said he was "comfortable" with forecasts published by the central bank in August which showed inflation falling back to target in the medium term.
Consumer price inflation has been above 2 percent since December 2009, which the BoE has largely blamed on one-off factors such as sterling weakness and a rise in value-added tax at the start of the 2010. The economy grew by 1.2 percent in the second quarter but most analysts are worried that planned fiscal tightening could hit growth hard next year.
House prices are falling again despite record low interest rates. A survey by the Royal Institution of Chartered Surveyors showed them dropping at their fastest rate since May 2009. RICS's headline house price index dropped to -32 from -8, the sharpest one-month fall since June 2004, and newly-agreed sales suffered their biggest fall in two years. The core rate of inflation - which excludes volatile food and energy costs - rose to 2.8 percent from July's 2.6 percent.
On the month, CPI inflation jumped by 0.5 percent, compared to a 0.2 percent fall in July and forecasts for a 0.3 percent increase. Food prices rose at their fastest annual pace since July 2009, with strong monthly rises in the cost of bread, cereals and vegetables.
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