UK inflation held steady at 3.8% in August, reinforcing expectations that the Bank of England will leave interest rates unchanged at 4% this Thursday. Rising prices in food, restaurants, hotels and petrol offset a fall in airfares, keeping inflation elevated and well above the BoE's 2% target. Services inflation, a key measure of domestic price pressures, eased slightly to 4.7% but remains stubborn. This persistence in price growth has led traders to push back expectations for rate cuts, with only one or two small reductions now priced in by the end of next year. Sluggish economic growth, just 0.2% in the three months to July, leaves policymakers in a difficult position. For Chancellor Rachel Reeves, the figures are a setback ahead of her autumn budget, as high inflation complicates efforts to spur growth and manage public finances. Markets responded calmly, with sterling flat and bond yields little changed, reflecting the fact that the data was largely in line with forecasts.