UK inflation rate dips back below double figures

The UK inflation rate has fallen back to 9.9%, figures from the Office for National Statistics (ONS) have confirmed.

Consumer Price Index (CPI) data showed that inflation in the UK climbed by 9.9% in the 12 months to August 2022, down from a figure of 10.1% in July.

The ONS reported that a fall in the price of motor fuels made the largest downward contribution to the change in the CPI annual inflation rate between July and August, while rising food prices made the largest contribution to offsetting the upward increase in the rates.

On a monthly basis, CPI inflation increased by 0.5% in August 2022, which compared to a jump of 0.7% in August last year.

Reacting the announcement, chief investment strategist at wealth manager Evelyn Partners, Daniel Casali, suggested there are “mixed signals” in the August inflation data.

“On the one hand, headline CPI inflation came in lower than expected, but the underlying core CPI measure remains stubbornly high, increasing the pressure on the Bank of England (BoE) to raise interest rates by more than the 50 basis points expected by the Bloomberg consensus of economists when it meets on 22 September.

“Nevertheless, this August print does not reflect recently announced policy measures, which will have a material effect on future inflation readings. The new Liz Truss government delivered a significant intervention in the energy market, including a two-year ‘energy price guarantee’ that fixes the average household bill at around £2,500, based on typical usage, and lasts for two years, starting 1 October. This comes on top of a £400 energy rebate from the previous government under Boris Johnson.

“By ‘capping’ utility energy prices, this likely means that headline CPI inflation is set to peak earlier and lower than some economists had previously predicted.”

While the lowest figures show a dip in the annual CPI inflation rate, July’s figure of 10.1% was the highest annual rate recorded in the ONS series, which began in January 1997.

Figures indicate that the CPI rate was last higher than this around 40 years ago, when 1982 estimates show it ranging from a high of almost 11% in January down to approximately 6.5% in December.

Technical director at Canada Life, Andrew Tully, said the latest inflation numbers will “do little to reassure households across the country” who are struggling to come to terms with increased prices and higher bills.

“It has to be said that the immediate outlook looks bleak, with the BoE predicting the peak of inflation to come later this year at around 13%. The peak, when it does come, will offer little respite when the tail of inflation is predicted to last well into next year and not come close to the target of around 2% for several years.


“While UK workers continue to feel the pain as wages lag inflation, there will be some positive news in the coming months for retirees. As inflation marches on, September’s data will determine the living standards for millions of retirees across the UK for the coming year, and it is highly likely the state pension is on track to increase by a record amount in April 2023.”

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