(Bloomberg) — Prices in Britain’s shops have fallen for the first time in almost three years, as Bank of England policymakers mull further interest rate cuts.

Retail prices dropped 0.3% from Aug. 1 to Aug. 7 from a year earlier, according to a report Tuesday by the British Retail Consortium. That’s a sharp slowdown from the 0.2% rise in July.

The drop was because retailers were forced to slash prices to offload summer clothes and household goods after the gloomy weather, Helen Dickinson, the BRC’s chief executive officer, said. 

Consumers are still being cautious about how much they spend after soaring inflation caused the worst cost-of-living crisis in a generation.

The BOE cut rates earlier this month for the first time since 2020 from the highest level in 16 years and signaled more reductions ahead. The pace of those cuts and when they happen depends on the performance of the economy over the coming months. Traders are expecting at least one more cut this year, but currently not until November.

On Friday, the pound jumped to its highest level against the dollar in more than two years after Federal Reserve chair Jerome Powell seemed to confirm that US rates would be cut in September.

BOE Governor Andrew Bailey said at Jackson Hole on Friday it is “too early to declare victory” over inflation, but added that the risks of persistent inflation appear to be receding.

The outlook for commodity prices remains uncertain due to harvests globally and geopolitical tensions, the BRC’s Dickinson said. “As a result, we could see renewed inflationary pressures over the next year,” she added.

©2024 Bloomberg L.P.