The UK’s inflation rate has fallen to its lowest level since spring 2022, the start of the Ukraine war.
The Consumer Prices Index rose by 6.8% in the year to July, the Office for National Statistics reports, down from 7.9% in June, meeting City economists’ expectations.
That’s the lowest inflation rate since February 2022, and further from the peak of 11.1% set last October.
But it still leaves inflation well over the Bank of England’s target of 2%.
Julian Jessop, economics fellow at the Institute of Economic Affairs, the right-wing tank, argues that that Bank of England should resist raising interest rates in September.
Jessop says the BoE should pause, and assess the impact of its previous 14 increases in interest rates: “The inflation data shows a welcome fall in the headline rate, but core inflation that excludes food and energy remains stuck at 6.9%. The headline rate is also likely to tick up in August, reflecting higher fuel and alcohol prices, some unhelpful base effects, and the continued strength of the labour market.
“There are still plenty of reasons to expect inflation to tumble over the rest of the year, notably the sharp slowdown in money and credit growth. Rising unemployment and falling vacancies suggest that wage pressures will soon peak too.
“Unfortunately, the Bank of England continues to look backwards at the headline data over the last month or two, rather than pause to assess the impact of the substantial tightening in policy that is already in place. This makes another unnecessary interest rate increase more likely.”