Inflation slows: Price rise drop to 7.9% says ONS

The Office for National Statistics (ONS) has reported a drop in the inflation rate, indicating that the pace of price rises is slowing.

According to the ONS, the annual inflation rate dipped from 8.7% in May to 7.9% in June, although consumer prices are still rising.

This measurement, indicated by the consumer price index (CPI), suggests that the speed of price increase is lessening.

The ONS also reported a drop in core inflation, which excludes more volatile components such as food and fuel, from 8.7% to 6.9%.

This key indicator had been on the rise since the start of the year.

A secondary measure of inflation, which is often observed closely by the Bank of England when deciding interest rate policies, remained constant.

The steep drop in inflation has surpassed market expectations and brings it back in line with the Bank of England’s predictions published in May.

The Bank, which has been under pressure to continue raising interest rates, now has reason to reconsider, potentially providing relief to UK households.

Grant Fitzner, Chief economist at the ONS said: “Inflation slowed substantially to its lowest annual rate since March 2022, driven by price drops for motor fuels. Meanwhile, core inflation also fell back after hitting a thirty-year high in May.”

“Food price inflation eased slightly this month, although it remains at very high levels.”

“Although costs facing manufacturers remain elevated, especially for construction materials and food items, the pace of growth has fallen across the last year with the overall cost of raw materials falling for the first time since late 2020.”

“Today’s chunky inflation rate fall – the joint second largest this century – offers some unambiguously good news after months of disappointing data on the state of the economy,” said James Smith, Research Director at the Resolution Foundation.

“The scale of the fall will ease pressure on mortgages and wages, with the Bank of England less likely to keep interest rates higher for longer, and Britain’s latest 18-month pay squeeze coming to an end.”

TUC General Secretary Paul Nowak said:  “Although some prices are rising a little less rapidly, Britain’s cost of living crisis is far from over.

“After 13 years of falling living standards, household budgets remain under intolerable pressure.

“While the government watches from the side lines, low-income families are running out of food.

“Ministers must do more to protect those most in need. Working people desperately need a credible plan for boosting growth and creating decent, well-paid jobs across the country.

“The Tory government have yet to provide one.”

Although the UK still reports the highest inflation rate among the G7 countries and the third highest among OECD advanced countries, the sizeable inflation reduction has lessened the country’s status as an outlier in battling inflation. Inflation is now lower than it’s been since March 2022.