Core inflation remained unchanged between June and July.
CPI inflation rose by 6.8% in the 12 months to July, down from 7.9% in June, the latest ONS figures reveal.
On a monthly basis, CPI fell by 0.4% in July, compared with a rise of 0.6% in July 2022.
CPIH inflation, which includes owner occupiers’ housing costs, saw an annual rise of 6.4%, down from 7.3% in June.
Falling gas and electricity prices provided the largest downward contributions to the monthly change in CPIH and CPI annual rates. Food prices rose in July, but by less than in July 2022, also leading to an easing in the annual inflation rates.
Despite the reduction, Core CPI and CPIH inflation – excluding energy, food, alcohol and tobacco – remain unchanged between June and July, at 6.9% and 6.4% respectively.
Paul McGerrigan, CEO at Loan.co.uk, said: “It will come as a considerable relief to both the Monetary Policy Committee and most of the population to see the headline inflation rate continue a downward trajectory.
“On the surface of things a 1.1% drop in CPI is a very positive sign, but it’s too early for the committee members to begin patting themselves on the backs, core inflation remains exceptionally stubborn at 6.9% for July, unchanged from June, meaning we’re not out of the woods.
“Now is the time for the Bank of England to hold its nerve and allow its recent interest rate hikes to have an effect, which takes months to run through into the wider economy, rather than it’s hitherto more knee jerk responses, especially when you consider that almost a third of UK mortgagees are struggling to afford their monthly payments according to the ONS.
“Brokers need to be on the front foot with all the tools at their disposal to help those who are struggling in these economically turbulent times.”
Debapratim De, senior economist at Deloitte, commented: “While the fall in headline inflation is a welcome development, core inflation figures indicate that underlying price pressure remains unchanged. That, along with accelerating services prices and yesterday’s strong wage data, suggests that the Bank of England’s objective of restoring price stability is still far from being achieved.”
James McManus, chief investment officer, Nutmeg, said: “Today’s inflation number is something of a mixed picture. On the one hand, the headline figure continues to fall – as the effect of lower energy prices feeds through – and is something that should offer some relief to consumers as the rate at which prices are rising is continuing to slow. Equally, it provides some optimism for policymakers at the Bank of England that measures it has taken to bring inflation under control and closer to its 2% target, are starting to take effect. However, this needs to be balanced with the ‘stickier’ and still stubborn impact of higher food prices and rising wages.
“Yesterday, we saw the highest annual rate of wage increases since records began in 2001, which will likely be cause for concern for the Bank of England. While some may have expected a pause in the rate rising we have seen of late, high wages, which add ‘stickiness’ to inflation, may prompt another rise when the Bank’s Monetary Policy Committee next meets.
“Whatever the decision, data out this week shows we’re far from out of the woods and the balancing act must continue.”
Paresh Raja, CEO of Market Financial Solutions, added: “Another step in the right direction, with today’s CPI drop following on from the smaller-than-expected base rate hike at the start of the month. But it might be a case of two steps forward, one step back; all the talk this week has been that we are in for a shock rise in inflation when next month’s data comes out on 20 September. Given the Bank of England’s next interest rate decision follows the next day (21 September) that will likely prove a hugely important 48 hours.
“For now, we should allow some positivity to permeate back into the property and lending markets. After a challenging 18 months, any time inflation falls should be welcomed, and we could see such good news reflected in the products and rates available to property buyers. Still, lenders must double down on a proactive approach to supporting brokers and borrowers who will be feeling the effects of high inflation and consistent base rate hikes. In turn, lenders can help the market return to a more buoyant state.”
Rozi Jones (Financial Reporter)