The inflation easing in the UK came unexpectedly for some financial experts who had predicted a 7.1 percent rise in August due to an increase in oil prices. However, Britain’s high inflation rate fell from 6.8 percent in July to 6.7 percent in August. This decrease was driven by a slowing rise in food prices and often-volatile hotel prices and airfares.
This news is a relief to consumers who have been struggling with the impact of the high inflation rate throughout the year. The Office of National Statistics (ONS) attributes the monthly drop in inflation to price easing in food and non-alcoholic beverages. A range of foods, including milk, cheese, eggs, vegetables, and fish, was cheaper in August compared to the previous month.
Furthermore, the annual inflation rate for restaurants and hotels was the lowest since May 2022, at 8.3 percent. The decrease in airfare prices also contributed to the easing of inflation in August. Airfares fell by 2.1 percent compared to a rise of 13.4 percent the previous year.
However, fuel prices did not contribute to the inflation easing as they rose by 0.2 percent compared to a fall of 1.2 percent in the same period last year. Despite the unexpected inflation easing, the government has made it a priority to tackle high inflation and aims to halve it by the end of the year.
Prime Minister Rishi Sunak hailed the new figures, stating that it was “good news for hardworking families” across the UK. The government needs to bring inflation down to around 5 percent by the end of the year to achieve its goal. Chancellor Jeremy Hunt also expressed that the government’s plan is working, with inflation down 40 percent from its peak.
The Bank of England meeting on Thursday will determine the new cost of borrowing money. With the CPI slowing down, borrowers may see the bank rate remain unchanged at 5.25 percent, bringing relief to households struggling with high mortgage rates. However, there is a risk of the bank overshooting on rate hikes and further damaging the UK’s economic prospects.
Shadow Chancellor Rachel Reeves criticized the Conservatives for the high inflation figures and vowed that Labour would make Britons better off. The latest inflation easing comes ahead of the Conservative Party Conference in October, where the ruling party will have the opportunity to showcase its economic progress in response to opposition criticism.