Inflation fell to 7.9% in June

The annual rate of inflation fell to 7.9% in June, according to the latest Consumer Price Index (CPI) data from the Office of National Statistics (ONS).

The measure of price changes found that the cost of the ONS’ basket of goods had increased 7.9% on where it was last year, but just 0.1% on May, when the annual rate of inflation was 8.7%. While still almost four-times the Bank of England’s 2% target for inflation, inflation is now at its lowest level since March 2022 and continues a downward trend from its recent peak in October 2022.

Food and drink remains the segment seeing the fastest price growth, with average prices up over 18% on June last year. Falling prices of motor fuels were the largest downward contributor to the CPI figures, with transport costs as a whole 1.7% less than June last year.

The latest fall in inflation now makes a further steep rise in interest rates less likely. The Bank of England last month announced its 13th rate rise since December 2021 as it has attempted to curb rising inflation by limiting the availability of cash in the economy, while balancing the economic impacts of high interest rates on mortgages.

Economists are now expecting a more modest 0.25 percentage point rise is set to be agreed by the Bank of England’s Monetary Policy Committee on 3rd August. Despite this latest fall in inflation, the UK continues to have the highest rates of price increases among the world’s major economies, behind the Eurozone (5.5%) and the USA (3%), both of which have also reacted by increasing interest rates.