UK inflation holds steady

Petrol prices have been rising

The UK's inflation rate was unchanged last month, as cheaper holidays offset higher petrol and clothing costs, according to the latest official data.

The Office for National Statistics (ONS) said underlying inflation - which excludes mortgage interest repayments - came in at 2.9% in August, unchanged from July.

The headline rate of inflation - which includes mortgage interest payments - fell to 2.9% from 3.1% the previous month.

The Harmonised Index of Consumer Prices, a measure which the government is set to begin targeting, showed inflation rising to 1.4% from 1.3% in July.

Interest rates

August's figures mean that underlying inflation has now been above the government's 2.5% target for 10 months in a row.

However, it has remained within the one percentage point leeway that the measure is allowed to fluctuate in around the 2.5% target.

The 2.9% figure was in line with expectations and most analysts do not now expect the Bank of England to change interest rates before the end of the year.

"Underlying inflation has remained consistently above the Bank of England's target for some time, and we don't expect it to come down significantly in the next few months, given a rise in oil prices and the strength in the domestic economy," said Tamiko Bayliss, economist at Commerzbank.

"But I don't think the Bank of England will be too concerned at the moment."

Interest rates are currently at a 48-year low of 3.5%.

Cheaper breaks

The ONS said the main upward influence on prices during August came from motoring costs.

Petrol prices rose by more than last year and car prices fell by less than in 2002.

There was also a large increase in clothing and footwear costs.

But offsetting these price rises was a fall in the cost of leisure services, especially for foreign holidays.