UK inflation holds at 3.8%, highest among big rich economies

British inflation held at 3.8 per cent in August, the highest of any major advanced economy, according to official figures that underscore why investors believe the Bank of England is unlikely to cut interest rates again this year.

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High inflation is a problem for Britain's government as well as the BoE. Finance minister Rachel Reeves said last week that fellow ministers should focus on helping the central bank to slow price growth as well as boosting economic growth.

Inflation for consumer services - closely watched by the BoE as a gauge of domestic price pressures - slowed to 4.7 per cent from 5.0 per cent in July, the Office for National Statistics said on Wednesday.

Core inflation, which excludes energy, food and tobacco prices, fell to 3.6 per cent from 3.8 per cent.

Most economists polled by Reuters and the BoE had forecast that the headline measure of inflation would hold at 3.8 per cent.

Sterling and British interest rate futures were little changed by the ONS data.

BoE constrained on rate cuts