The current rate of inflation has fallen to 6.8% in July, down from 7.9% in June, largely as a result in lower energy costs
Falling gas and electricity prices forced inflation down and food prices began to ease off slightly. Core inflation, however, remained unchanged at 6.9%, showed Office for National Statistics (ONS) figures.
The inflation rate for housing, water, electricity and gas stood at 5.4% in July, displaying a fall from a peak of 11.8% in January and February and 7.3% in June 2023.
This was largely driven by the changes in gas prices, with monthly prices falling by 25.2% between June and July, compared with a rise of 0.1% between the same two months a year ago – the highest recorded fall since 1988.
Food and non-alcoholic drink prices rose by 0.1% between June and July to 14.9%, down from 17.4% in June and from a recent high of 19.2% in March.
Milk, cheese and eggs provided a negative contribution to the monthly change, with the annual rate down to 18.7% from 22.8% in June.
Matthew Corder, deputy director of prices, ONS, said: ‘Inflation slowed markedly for the second consecutive month, driven by falls in the price of gas and electricity as the reduction in the energy price cap came into effect.
‘Although remaining high, food price inflation has also eased again, particularly for milk, bread and cereal. Core inflation was unchanged in July, with the falling cost of goods offset by higher service prices.’
Petrol and diesel prices stood at 143.2 and 145.2 pence per litre respectively, compared with 189.5 and 197.5 pence per litre in July 2022.
The Bank of England raised the base rate to 5.25% earlier this month, the 14th consecutive interest rate rise. Many economists expect this figure to rise to 5.5% in September.
Danni Hewson, head of financial analysis at AJ Bell, said: ‘Whilst the latest headline inflation numbers have finally followed the Bank of England’s repeatedly re-written script, there will be little cause for celebration. This is a decidedly cup half full moment.
‘Inflation is still significantly above that two percent target, prices are not falling, they’re just not rising as fast as they have been.
‘Today’s figure does buy the government a bit of breathing space and it seems Rishi Sunak’s five percent target is now achievable. But there remains a question for many families facing the prospect of spiralling mortgage costs.’
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