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UK inflation rate drops below 10% as petrol prices drop

The UK’s inflation rate fell back to single digits in August as petrol prices fell, giving households some relief as they head into winter.

The headline consumer price index was 9.9 percent higher than a year earlier in the month, down from a 40-year high of 10.1 percent in July.

Economists now expect inflation rate hovered around 10% throughout the fall instead of rising to more than 15%, following Prime Minister Liz Truss’ announcement that the government would protect households from an 80% increase in gasoline prices in October.

But pumping around £150 billion into the economy to support households and businesses with gas and electricity subsidies is likely to keep inflation higher in the long run, putting pressure on Bank of England to further increase interest rates.

Economists expect a 0.5 percentage point gain when the bank’s Monetary Policy Committee meets next week, with the official rate expected to rise from 1.75% today to at least 3% at the end of the year.

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