DAVY VIEW

While UK headline inflation increased above 3% again in August, the result was in line with consensus and driven by another jump in energy prices. Core inflation was steady at 2.6% for a third consecutive month, and services inflation remained at 3.4%. The monthly changes were encouraging in that evidence of second-round effects of higher energy prices remains very limited. Still, a hawkish tone is likely from the Bank of England (BoE) this week.