UK INFLATION FALLS TO 6.8 PCT IN JULY, DRIVEN BY DROP IN ENERGY PRICES

Wed 16 August 2023:

The Consumer Prices Index (CPI) in the United Kingdom (UK) climbed by 6.8 percent in the twelve months to July, down from 7.9 percent in June, according to the Office for National Statistics (ONS) on Wednesday.

“Inflation slowed markedly for the second consecutive month, driven by falls in the price of gas and electricity as the reduction in the energy price cap came into effect,” said Matthew Corder, ONS deputy director of prices.

According to the ONS, the CPI annual inflation rate for housing, water, electricity, gas and other fuels was 6.8 percent in July, down from a peak of 26.7 percent in January and 12.0 percent in June.

“Although remaining high, food price inflation has also eased again, particularly for milk, bread and cereal,” Corder added.

Data showed the inflation rate of food and non-alcoholic beverages eased to 14.9 percent in July, the slowest annual rate of growth since September 2022.

July’s 6.8 percent inflation rate was the lowest since February 2022, falling from the peak of 11.1 percent set last October. But it is still far above the Bank of England’s (BoE) target of 2 percent.

“Inflation has fallen rapidly over the past six months, but the UK still has the highest rate in the Group of Seven (G7) and the bank faces a daunting task in further taming price pressures,” said James Smith, research director at the think tank Resolution Foundation.

The BoE raised the interest rate to 5.25 percent earlier this month, the 14th consecutive rate hike since December 2021 to battle the stubbornly high inflation.

Also, July’s core CPI, which excludes energy, food, alcohol and tobacco, still rose by 6.9 percent in the 12 months to July, unchanged from June.

Institute for Fiscal Studies, a leading economics research institute in the UK, said Wednesday’s data has put British Prime Minister Rishi Sunak’s inflation promise in jeopardy.

“The challenge is that core inflation remains stubbornly high, and considerably higher than was expected back at the start of the year,” the institute said, noting that Sunak has never really had much in the way of levers to pull to bring inflation down.

In January, Sunak pledged to halve the rate of inflation, which was 10.7 percent when he made the promise, by the end of the year. This means the prime minister only has a few more months to bring down the inflation rate to 5.4 percent.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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