Inflation has fallen to 6.7% for the 12 months to August, new figures published by the Office for National Statistics (ONS) have revealed.

This is down from price increases of 6.8% in the year to July, and the recent peak of 11.1% recorded in October last year.

Price rises did jump on a monthly basis, however, with consumer prices index (CPI) inflation climbing by 0.3% in August. This compares to a rise of 0.5% in August last year, which the ONS suggested was the reason for the slight easing in the annual rate.

The ONS also reported that its core CPI measurement – which excludes energy, food, alcohol and tobacco – rose by 6.2% in the 12 months to August, reflecting a more significant fall than the headline CPI rate, down from from 6.9% in July.

Managing director for retail direct at Standard Life, Dean Butler, commented: “After a tough couple of years of squeezed living standards it’s nice to see some light at the end of the tunnel with inflation now below the rise in average earnings.

“However, it’s fair to say not everyone will be feeling the benefit, particularly with meteoric interest rate rises continuing to put pressure on household finances. If you do find yourself with even a small amount of spare cash, it may be worth considering topping up your short or long-term savings. A more positive side effect of rising interest rates has been better returns on cash savings, with some best-buy accounts now offering rates not too far off inflation.

“It’s recommended everyone has three to six months’ worth of their salary in an easy access ‘rainy day’ savings account, to meet those sudden unexpected events that come up in life.”

The annual rate in August was the lowest since February 2022, and the ONS figure comes a day before the Bank of England (BoE) announces a new decision on interest rates, as the central bank continues efforts to curb the rate of annual inflation.

Financial experts are expecting the Monetary Policy Committee (MPC) at the BoE to further increase its base rate, which currently stands at 5.25%, for a fifteenth meeting in a row.

CEO at Loan.co.uk, Paul McGerrigan, added: “Up next: the BoE’s big call. Given the surprise reduction in CPI by 0.1% to 6.7%, and the hitherto more stubborn core CPI – which excludes energy, food, alcohol, and tobacco – dropping by 0.7% to 6.2.%, the Monetary Policy Committee (MPC) will try to decipher whether that means current interest rates are doing the job to curb inflation, have they had time to flow through or do we need another bump up now?

“If you’re on an SVR or tracker mortgage, you’re tuned in, no doubt. Let’s hope the Bank has the balance right and and doesn’t drive us into a heavy recession with overly aggressive and relentless hikes.

“The MPC will be aware that rate hikes have shaken the housing market and economy and are having an impact. Let’s hope members adopt a ‘watch-and-wait’ game plan while the latest rate changes settle in.”

Share Story: