The annual inflation in UK has dropped to a 15-month low and this provides relief to Cost-of-Living Challenges. UK’s yearly inflation rate fell notably in July, an official report revealed, due to decreased energy prices and as experts predicted.
The Consumer Prices Index (CPI) rose 6.8% annually, down from 7.9% in June, according to the Office for National Statistics.
July’s growth matched analysts’ predictions, including the Bank of England’s forecast of 6.8 percent.
This follows a larger-than-expected decrease in June when the CPI fell by 0.8 percent.
Nonetheless, UK inflation has been the G7’s highest for months, despite multiple Bank of England interest rate hikes.
While gas and electricity prices fell in July, food costs rose slowly compared to the same month the previous year.
“Inflation notably slowed for a second consecutive month, due to reductions in gas and electricity prices,” said ONS deputy director of prices Matthew Corder.
“While food price inflation remains high, it has eased, particularly for milk, bread, and cereal.
“Core inflation remained unchanged in July, as falling goods prices were balanced by higher service costs,” he added.
Prime Minister Rishi Sunak aims to cut inflation by half this year to around five percent by 2024.
Despite projections by the Bank of England of a possible inflation increase next month, Sunak maintained that Wednesday’s figures demonstrated “the plan’s effectiveness.”
“If we adhere to my outlined plan, we will achieve our goal,” Sunak affirmed.
Mixed reactions to UK inflation data
However, the Institute for Fiscal Studies, an economic think tank, expressed skepticism.
“The persistently high rate of price inflation for goods and services beyond food and energy puts the target at risk,” noted IFS research economist Heidi Karjalainen.
Finance Minister Jeremy Hunt welcomed the latest CPI data but cautioned that “we haven’t reached the finish line,” emphasizing the priority of achieving the Bank of England’s two percent inflation target “as soon as possible.”
Tuesday’s data showed UK unemployment rising in the three months ending in June, but wages saw substantial annual growth.
Since late 2021, increases in interest rates have caused widespread financial challenges, particularly affecting mortgages as lenders raise their rates.
Wednesday’s CPI figures might not prevent another rate hike in late September, when the Bank of England’s monetary policy committee meets to decide on raising its current base rate of 5.25 percent.