ISSUE NO. 16 · MONDAY 24 AUGUST 2026

Inflation at 2.9%, a pay recovery the state is funding, and a Budget argument that turns out to be about the promises rather than the buffer

Inflation reached 2.9% in the year to July, up from 2.6%, which sounds like the week's story until you look at what actually moved. Services inflation eased to 3.4% and core came in at 2.6%. The rise was imported through the energy price cap, not generated here. The Bank can raise rates against a wage-price spiral; it cannot raise them against Ofgem. In the same week the government sold medium-term debt at 5.155%, the highest rate on that maturity since 2007, and consumer confidence rose for a fourth straight month regardless.

Underneath, the week was a catalogue of things costing more than they bring in. Jaja Finance is paying 15% for the money behind an Asda credit card, and its debt interest now exceeds its entire turnover. Klarna lost nearly a fifth of its value on a modest downgrade. A decade of added costs has left mid-sized firms with the word resilience and not much else, while the jobs market has stopped hiring and stopped firing at the same time. Even the good news had a payer: food inflation fell to 1.3% because retailers absorbed it, not because anything got cheaper to produce.

Property ran three ways at once. Asking prices had their worst August since 2018, Westminster lost 25.4% off its average home, and prime London stopped being a safe haven when a developer holding £30m of it ran out of cash. In the market's plumbing, ten wealth managers now serve 89% of UK clients and tracker funds passed half the market on their fiftieth birthday. The backdrop was American, with 30-year US borrowing costs at their highest since 2001 — and the cap reset that started all of it was visible a week before it landed.

Below in full: why 2.9% is an imported number, who is actually funding the pay recovery, and why the Budget argument is about promises rather than the buffer. After those, the full eight numbers, the week ahead, and one calculator worth five minutes.

Lead

Inflation reached 2.9% in the year to July, up from 2.6%. The peak is still months away.

The energy price cap reset fed straight into household prices, which is why the headline moved while the domestic measures did not: services inflation eased to 3.4% and core came in at 2.6%. That distinction decides what can be done about it, because imported pressure does not answer to Bank Rate. The harder number arrived in the same week, when the government sold medium-term debt at 5.155%, the highest on that maturity since 2007. Burnham inherited this rather than causing it, but the bond market has started charging him for the wait, and higher yields price out exactly the cost of living support that a rising cap makes necessary. The 17 September decision will show how much patience the Bank has left. Read the full story →

The Numbers

Friday closed the week with both indices up — the FTSE 100 by 0.64% and the FTSE 250 by 0.86%, leaving the 250 within 150 points of its twelve-month high. The gilt is the figure that keeps climbing: 5.12% for August so far against July's 5.10%, and 1.37 points above a Bank Rate that has not moved since December. Petrol is the one number here that fell.

More News

Total pay grew 4.1%. Public sector pay grew 6.1%; the private sector managed 2.8%.

Wage growth beat the market's forecast of four, and 3.5% excluding bonuses. The split underneath is where it stops being good news: public sector pay ran at 6.1% in the three months to June while the private sector managed 2.8%, which makes the recovery in the national figure largely a transfer rather than a broad improvement in what work pays. Vacancies fell by 6,000 to 707,000, the lowest in more than five years, and unemployment held at 4.9%. If you are on the private side of that line, none of it feels like progress. The gap matters beyond fairness, because pay growth funded by the state and pay growth funded by employers say different things about where inflation goes next. Read the full story →

The buffer is £22.7bn and intact. The promises stacked behind it come to £39bn a year.

Britain spent the summer bracing for a tax raid in October, and the City's own arithmetic points somewhere else. Fiscal headroom stands at £22.7bn on the March forecast. Shifting migration trends and unreliable labour market data could clip around £5bn from that, which leaves the position tight rather than broken. The problem is not the buffer at all — it is the wish list behind it. Defence at 3% of GDP, a higher personal allowance and social care together could cost £39bn a year more than the tax base currently carries. That is not a forecasting problem and it will not be solved by a better set of numbers in the spring. Healey will spend October deciding which promise goes first. Read the full story →

The Week Ahead

• Monday 24 August, 9.30am BST — Data centres and the UK National Accounts. How the ONS is going to count the buildings the AI boom is putting up. Dry, and it decides how much of that capex ever shows in the growth figures.
• Thursday 27 August, 9.30am BST — Young people not in education, employment or training. The sharpest read available on a market that has stopped hiring, because first-time jobseekers feel a frozen door before anyone else does.
• Thursday 27 August, 9.30am BST — Economic activity and social change, real-time indicators. The fastest-moving series the ONS publishes, and the only near-live look at spending you will get this week.
• Friday 28 August, 9.30am BST — Quarterly personal well-being statistics. Not a market number, and worth a glance in a week when confidence has risen four months running while the cost of everything has not.

The Toolbox

One tool from the site each issue, picked to fit what has just happened. Free, no sign-up, and it shows its workings.

Stamp duty calculator

"Three of last week's stories were house prices falling, and stamp duty is the line in the Budget most often floated as the fix. Worth knowing what you would actually pay before the speculation starts."

The Close

The week's argument was never really about inflation. It was about who carries it, and by Friday the answer had moved. The buffer is £22.7bn and intact; the promises stacked behind it come to £39bn a year. That is not a forecasting problem that a better spring might fix — it is a choosing problem, and it lands on 28 October. Nine weeks.

If something here is wrong, or there is something you want dug into, just reply. It comes straight to me.

MJB