The decline was a surprise as most analysts had expected inflation in the UK to rise to 7%, but the new figure is still way above the Bank of England’s target of 2%.
Inflation in the UK fell by 1% in the year to August in comparison to the previous month, according to the Office for National Statistics (ONS).
The office published new figures on Wednesday showing that the Consumer Prices Index, which monitors how costs change over time, rose by 6.7% in the 12 months to August as opposed to 6.8% in July.
The figure has now fallen for three months in a row, and to its lowest level since the beginning of Russia’s full-scale invasion of Ukraine in February 2022.
The ONS said lower hotel and air fare costs and moderate food price rises helped offset an increase in energy prices on the back of higher crude oil prices.
The decline was a surprise as most analysts had expected inflation in the UK to rise to 7%, but the new figure is still way above the Bank of England’s target of 2% and higher than any other G7 country.
The central bank is due to announce its next decision on interest rates on Thursday, with most economists thinking it will raise its main borrowing rate once again by a quarter of a percentage point to a near 16-year high of 5.5%.
Raising interest rates is often used as a tool to slow the economy by reducing demand and therefore put the breaks on price rises.
The fall in UK inflation comes after inflation in the Eurozone was revised down to 5.2% in August.
While the surprise dip in UK inflation is an encouragement, it follows the ONS announcing last week that the country’s GDP shrunk in July, with higher rates of unemployment but also higher wages.
Source: Euro News
