The latest piece of pessimistic economic news delivered to Chancellor Rachel Reeves means interest rates will stay on hold today, experts suggest.

Inflation in the year to August remained at 3.8%, according to official figures, after food costs continued to rise.

Food price inflation – now running at over 5% – has risen for five months in a row as retailers pass on government increases in the minimum wage and National Insurance Contributions m.

Overall inflation remains above the Bank of England’s 2% target and experts say this means it’s highly unlikely that the Bank will cut its base rate today.

Yael Selfin, chief economist at KPMG UK, says Britain is “an outlier in recent months on inflation compared to other major economies.

“Since April, the rise in inflation has been driven largely by domestic policy choices, including the increase in employers’ National Insurance Contributions. 

“These higher costs have been passed on by businesses to consumers, feeding through into higher headline inflation.”

Nathan Emerson, chief executive of lettings agent body Propertymark, comments: “Considering the Bank of England had predicted that inflation could stand at 4% this month, it is positive news to see aspects have remained steady overall, and that we have witnessed three base rate cuts across the year to date, all of which have helped consumer affordability.

“There is still more work to do to help ensure that inflation falls to 2%, which is in line with the Bank of England’s own overall ambition. As we approach the autumn months, where spending priorities often take different directions, there are widely held hopes to see inflation pressures ease in key areas.” 

Steve Clayton, head of equity funds at business consultancy Hargreaves Lansdown, notes: “The overall level of inflation remains elevated compared to the Bank’s target rate and these numbers were no better than forecasts. It is perhaps Sod’s Law from the Bank’s perspective that just as services pricing starts to ease, goods prices begin edging higher. 

“Markets are currently pricing in just one more quarter point cut between now and the end of next year. Today’s figures are unlikely to change that outlook, suggesting that mortgage rates will remain stubbornly high for a while to come. On the other hand, the downward pressure on savings rates may well ease a bit.”