CPI inflation goes down in July compared to June, but air travel and hotel costs keep core inflation stubbornly high.
Consumer Price Index inflation (CPI) went down from 7.9% in June to 6.8% in July, according to figures published by The Office for National Statistics. CPI inflation relates to price changes for products and services. Lower gas and electricity costs were primarily responsible for the reduction.
This marks the second month in a row that CPI inflation – the most well-known indicator of inflation – has dropped.
Inflation remains stubbornly high overall and is still well above the Bank of England’s target rate of 2%. Hotel and air travel costs were responsible for keeping inflation high.
Core inflation, which excludes food and energy, remained at 6.9% in July, despite predictions of a slight fall to 6.8%.
Supermarket price war
Food prices have also risen sharply, with a 14.8% increase in the year to July. However, this is a reduction compared to 17.3% in June, and there is talk of a ‘price war’ among major supermarkets.
The Bank of England is expected to raise interest rates again in September to help bring inflation down further.
‘It looks like good news, as CPI inflation has fallen. However, core inflation remains stuck, food inflation remains high, and services inflation has increased,’ MB Associates’ Sales Manager Phil Leivesley says.
Phil adds: ‘June’s inflation results beat expectations, which led to the market revising down where it thought the Bank of England base rate would ultimately rise to, but July’s results are broadly what was expected. The Bank of England will likely use core inflation as its rationale to continue with base rate hikes. We’re at the beginning of the end of rate hikes,’ adds Phil, ‘But there is still some work to be done.’