The consumer price index (CPI) measure of inflation has fallen from 7.9% in June to 6.8% in July, the latest Office for National Statistics (ONS) data has revealed.

Although prices are still rising, the rate at which they are doing so is at a slower rate. The ONS has pointed towards the changes in the Ofgem energy price cap in July, which subsequently brought down bills.

Inflation also came down on goods and services including electricity, gas, milk, bread, cheese, petrol and diesel.

Prices are currently rising at the slowest rate since February 2022, when inflation was at 6.2%, leaving many hoping that the worst of the cost of living crisis could be over.

Furthermore, a record fall in monthly gas prices was recorded between June and July, falling by 25.2%. This is the largest drop the ONS has seen since it began collating the data 35 years ago in 1988.

However, the costs of services rose to a 30-year record of 7.4%, the highest rate since 1992.

Although further decreases in inflation are expected, with the Bank of England (BoE) forecasting a drop to 5% by the start of 2024, this is still considerably higher than its inflation target of 2%.

Chief executive officer at Market Financial Solutions, Paresh Raja, said: “Another step in the right direction, with today's CPI drop following on from the smaller-than-expected base rate hike at the start of the month. But it might be a case of two steps forward, one step back; all the talk this week has been that we are in for a shock rise in inflation when next month's data comes out on 20 September. Given the BoE's next interest rate decision follows the next day (21 September) that will likely prove a hugely important 48 hours.”

Head of financial analysis at AJ Bell, Danni Hewson, added: “The price of stuff is falling, and the latest producer prices suggest that trend will only accelerate as we head towards the back end of the year. And with wage growth of 7.8% people should start to feel the benefit in their pockets as the worst of the cost-of-living crisis seems to be drawing to a close.

“But this is a decidedly cup half full moment. Firstly, inflation is still significantly above that 2% target and even if it is cooling off faster than a sun burnt Brit diving into a hotel pool, prices are not falling, they’re just not rising as fast as they have been.

“Then there are the secondary effects that have indeed become embedded in the UK economy. Wage increases and price pressures have forced up service costs and that’s weaving its own nasty spell on core inflation. And it’s the core figure that will keep pressure on the BoE to keep raising interest rates until the sticky tendrils have been eradicated like weeds denied water.”

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