We will be there for you when you need us with day-to-day issues and your financial administration will be managed proactively by your Client Manager
The UK CPI inflation rate for August 2025, which was 3.8%, unchanged on July
CPI inflation for August was unchanged over the previous month at 3.8%. That was in line with market expectations and keeps inflation at its highest level since January 2024. In its August Monetary Policy Summary the Bank of England said “CPI inflation is forecast to increase slightly further to peak at 4.0% in September”.
The UK CPI reading was up 0.3% between July and August, the same as in the corresponding period of 2024. The CPI/RPI gap narrowed by 0.2% to 0.8%, with the RPI annual rate falling by 0.2% (to 4.6%). Over the month, the RPI index rose 0.4%.
The Office for National Statistics (ONS)’s favoured CPIH index fell by 0.1% to an annual 4.1%, again reducing its historically high margin above the CPI. As we have regularly said in recent months, a large part of that excess is due to the owner occupiers’ housing (OOH) category, which has a 17.1% weighting in the CPIH but is absent from the CPI. The OOH inflation rate dropped 0.2% to 5.3%, 2.7% off its peak January 2025 level and back to the level last seen in December 2023.
The ONS attributed the lower CPIH inflation to:
Main downward drivers
Transport. Overall prices rose by 2.4% in the 12 months to August 2025, down from 3.2% in the 12 months to July. On a monthly basis, prices rose by 0.4% in August 2025, compared with a rise of 1.3% a year ago.
Air fares rose by 2.1% between July and August 2025, compared with a rise of 22.2% between the same months in 2024. The smaller monthly rise in August 2025 resulted from a relatively high July index, which was probably influenced by the timing of the flights priced in relation to school summer holidays, particularly return flights from Europe. These return European flights were during the school term in July 2024, but during the school holidays in July 2025, potentially making them more expensive this year.
Prices for vehicle maintenance and repair fell this year but rose a year ago, particularly for roadside recovery services.
Within transport, these downward effects were partially offset by an upward contribution from petrol and diesel prices (both of which are still lower than a year ago).
Housing and household services. The 12-month inflation rate for housing and household services was 6.0% in August 2025, down from 6.2% in July. On a monthly basis, prices rose by 0.3% in August 2025, compared with a rise of 0.4% a year ago.
The easing in the 12-month rate between July and August 2025 mainly reflected a downward effect from owner occupiers' housing (OOH) costs, as discussed above.
Main upward drivers
Restaurants and hotels. Prices in this division saw an overall rise of 3.8% in the 12 months to August 2025, up from 3.4% in the 12 months to July. On a monthly basis, prices fell by 0.2% in August 2025, compared with a fall of 0.7% a year ago.
The largest upward effect came from accommodation services, specifically from overnight hotel stays priced the previous day, where prices fell this year by less than a year ago. There was also a smaller upward effect from canteens.
Food and non-alcoholic beverages. The 12-month inflation rate for food and non-alcoholic beverages was 5.1% in August 2025, up from 4.9% in July. This was the fifth consecutive increase in the annual rate and the highest recorded since January 2024, but it remains well below the 19.2% peak seen in March 2023. On a monthly basis, food and non-alcoholic beverages prices rose by 0.4% in August 2025, compared with a rise of 0.2% a year ago.
Five of the twelve broad CPI divisions saw annual inflation increase, while four fell and three remained unchanged. The unchanged categories are the ones with the highest annual inflation rate: Education (7.5%); Housing, water, electricity, gas and other fuels (7.4%); and Communication (6.1%).
Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) fell 0.2% to 3.6%. Goods inflation rose 0.1% to 2.8%, while services inflation, a focus for the Bank of England, was reversed from last month’s 0.3% rise with a reading of 4.7%.
The ONS has identified problems in the calculation of its Producer Price Inflation indices and in July issued a statement that publication of the data would be “paused” for the time being. This remains the case.
Source: Techlink Professional
This is a news bulletin and is up-to-date as of the date of publishing. Please check the publishing date at the top of the article.
Essential Wealth Management
1-2 Great Farm Barns
West Woodhay
Newbury
Berkshire RG20 0BP
Tel: 01488 669840
Fax: 01488 669216
Email: [email protected]
Essential Wealth Management is a trading name of Essential Wealth Management and Advice Ltd which is an appointed representative of 2plan wealth management Ltd which is authorised and regulated by the Financial Conduct Authority. Essential Wealth Management and Advice Ltd is entered on the FCA register (www.FCA.org.uk) under no. 518528. Registered office: 1-2 Great Farm Barns, West Woodhay,Newbury, Berkshire RG20 0BP. Registered in England and Wales Number: 04020006.
The Financial Ombudsman Service is available to mediate individual complaints that clients and financial services businesses aren't able to resolve themselves. To contact the Financial Ombudsman Service please visit: http://www.financial-ombudsman.org.uk/contact/index.html
The information on this website is subject to the UK regulatory regime and is therefore targeted at consumers in the UK.
Approved by 2plan wealth management Ltd on 20/05/2025
