Last month saw an unforeseen dip in inflation, even with concerns about escalating fuel prices in the lead-up to the Bank of England’s upcoming interest rate determination.
Data from the Office for National Statistics reveals that the Consumer Prices Index (CPI) decreased to 6.7% in August from 6.8% in July. Contrarily, the Bank had anticipated that the CPI inflation would ascend to 7.1%.
A drop in food costs contributed to this decline, despite drivers grappling with increasing petrol costs due to a global uptick in oil prices, influenced by supply reductions in Russia and Saudi Arabia.
When disregarding the fluctuating energy and food costs, core inflation went down to 6.2% in August from 6.9% in July.
Earlier in the month, Andrew Bailey, the Bank of England’s Governor, had hinted that inflation might rise, noting that prices had decreased in August the previous year but increased this August.
This week, officials will determine whether to increase the interest rates from the current 5.25%.
In August, the ONS reported that the primary factor behind decreasing prices was food. Additionally, the prices of accommodation services, known for their fluctuation, played a role in the decline.
Grant Fitzner, ONS’s chief economist, commented:
This month witnessed a slight relaxation in inflation, influenced by the inconsistent prices of overnight stays and air fares, alongside a smaller increase in food prices compared to the same period the previous year.
However, this was somewhat balanced out by a rise in petrol and diesel prices, in contrast to the sharp drop observed around this time the previous year, especially after the record highs in July 2022.
The drop in core inflation this month surpassed that of the overall rate, with services prices being a significant contributor to the decrease.
