Inflation fell by a tenth of a percentage point to 6.7% in August, according to the latest Consumer Price Index (CPI) data from the Office of National Statistics (ONS).
The latest decline, from 6.8% in July, brings inflation to lowest level in 16 months. The main contributing factors to August’s fall in the annual rate of inflation include food and drink prices, which while one of product categories with the highest annual rate of price rises, saw prices rise at a slower rate in July: month-on-month, some food categories such as fresh vegetables saw a fall in price on July’s CPI data.
Consumer rights group Which? have, however, criticised the impact of food price rises on headline figures. The ONS analyses shelf prices, and not offer prices or prices charged to those with loyalty cards which has seen steeper discounting in the past year and may better reflect the price shoppers are actually paying.
August also saw fuel prices rise month-on-month, reversing a trend of falling prices that has persisted since last year when prices spiked following Russia’s invasion of Ukraine. Petrol prices at the pump rose 5.3p per litre on July 2023’s figure (a 5.9p per litre rise was recorded for diesel).
The latest inflation data comes just a day before the Bank of England’s Monetary Policy Committee (MPC) meets to determine any further uplift to its base rate of interest, currently at 5.25%. The Bank’s MPC has consistently raised interest rates at every meeting since December 2021 as part of its remit to return inflation to its 2% target.
This latest fall in the rate of price rises, although small, was not expected by economists, and may trigger the Bank of England to raise interest rates by a smaller amount, or hold them at their current rate. Financial markets give even odds tomorrow (21st September) of either holding rates at 5.25% or a 0.25 percentage point rise, the odds of which have fallen sharply since the ONS’ latest inflation data was published.