The consumer prices index (CPI) dropped to 6.7 per cent in August, down from 6.8 per cent in July, according to the Office for National Statistics.
The Office for National Statistics revealed that inflation is now at the lowest rate since February 2022.
Saxo UK CEO, Charles White Thomson, described this news as a “modest and surprising improvement”.
Surprise was also expressed by Quilter Cheviot head of fixed interest research, Richard Carter who said the fall came “despite rising prices at the petrol pump”.
The ONS stated that the easing in the CPI annual rate was a result of prices rising by 0.3 per cent on the month compared with a rise of 0.5 per cent a year earlier.
It was additionally revealed that core inflation rose by 6.2 per cent in the 12 months to August, representing a further decrease from the 6.9 per cent in July.
The CPI goods annual rate rose slightly from 6.1 per cent to 6.3 per cent, while the CPI services annual rate slowed from 7.4 per cent to 6.8 per cent.
Meanwhile, on a monthly basis, CPI was found to have rose by 0.3 per cent in August 2023, a fall on the rise of 0.5 per cent in August 2022.
CPIH
The ONS also reported a fall in the consumer prices index including owner occupiers’ housing costs which rose by 6.3 per cent in August 2023, down from 6.4 per cent in July.
Core CPIH was also found to have experienced a drop, rising by 5.9 per cent in the 12 months to August 2023 compared to 6.4 per cent in July.
Additionally, on a monthly basis, CPIH rose by 0.4 per cent in August 2023, compared with a rise of 0.5 per cent in August 2022.
Food
The largest downward contributions to the monthly change in CPI and CPIH annual rates came from food, where prices rose less in August 2023 than a year ago.
Food and non-alcoholic beverages prices rose by 0.3 per cent between July and August 2023, compared with a rise of 1.5 per cent between the same two months a year ago.
Impact for interest rates
Following the announcement, Finder.com deputy editor and housing expert, Kate Steere, expressed hope that the Bank of England might “finally pause its base rate hikes at the next MPC meeting” as a result.
She added that this would “provide some much-needed relief to the housing market”.
However, Saxo's Thomson cautioned: “The UK remains an inflationary outlier and pressure remains on the Bank of England to suppress and manage inflation.”
He therefore predicted a 25 basis point interest rate hike to 5.5 per cent on September 21.
Quilter's Carter additionally stated: “Today’s inflation figure also has real political ramifications.”
He explained that, while this downtick is a positive, it will need to fall “considerably” more in order to meet Rishi Sunak’s target to cut inflation in half by the end of the year.
tom.dunstan@ft.com
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