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The headline rate of inflation has fallen by 0.1% to 6.7% in August, according to the latest data from the Office for National Statistics (ONS), despite prior concerns from economists that the rate was set to rise.
The largest downward contributions to the monthly change in annual rates came from food, where prices rose by less in August 2023 than a year ago, and accommodation services, where prices can be volatile and fell in August 2023.
Food and non-alcoholic beverage prices rose by 0.3% between July and August 2023, compared with a rise of 1.5% between the same two months a year ago. It comes as the annual rate for milk, cheese and eggs eased to 15.3% in the year to August 2023, down from 18.7% in July.
Meanwhile, the annual inflation rate for restaurants and hotels was 8.3% in August 2023, down from 9.6% in July, marking the lowest rate since May 2022.
Alternatively, rising prices for motor fuel led to the largest upward contribution to the change in the annual rates. The average price of petrol rose by 5.3 pence per litre between July and August 2023 to stand at 148.5 pence per litre in August 2023. Last year, prices fell by 14.3 pence per litre from a record high in July to stand at 175.2 pence per litre in August 2022.
ONS chief economist Grant Fitzner said: “The rate of inflation eased slightly this month driven by falls in the often-erratic cost of overnight accommodation and air fares, as well as food prices rising by less than the same time last year.
“This was partially offset by an increase in the price of petrol and diesel compared with a steep decline at this time last year, following record prices seen in July 2022. Core inflation has slowed this month by more than the headline rate, driven by lower services prices.”
Alpesh Paleja, CBI lead economist, added: “Inflation fell again in August, defying expectations of a slight uptick. We expect inflation to continue falling over the rest of this year, but the recent uptick in global oil and domestic fuel prices means that the path back down may now be bumpier.
“Despite the latest fall, the Bank of England will still be concerned by signs of stubbornly high domestic price pressures. As a result, another rise in interest rates tomorrow still looks more likely than not, though changes to monetary policy beyond this will be very data dependent. But with the MPC suggesting that rates will remain higher for longer, businesses and households should plan for tighter financial conditions being here to stay.”
