Inflation dropped to 6.8% in the year to July, according to the Office for National Statistics (ONS). The consumer price index (CPI) measure of inflation shows the rate fell from 7.9% in June.
No immediate end in sight - but sign that pressure finally starting to easeThe latest inflation data will provide some relief to officials at the Treasury. The consumer prices index is falling in line with the Bank of England's forecasts and, by the end of the year, it will be half the level it was last year.
The Bank of England has raised interest rates for 14 consecutive months. That has hiked up borrowing costs across the economy and created mortgage misery for millions of households. That's alarming for policymakers because robust pay growth risks spurring inflation even higher and the consequences of this wage pressure can be seen in the core inflation rate. This strips out volatile items, like energy and food, and measures underlying price pressures in the economy. The core inflation rate remained sticky at 6.9%, which suggests that healthy pay rises are supporting demand and, in turn, prices.
That being said, the recent rise in unemployment should, in theory, start to dampen pressure on wages and inflation. There are already signs that this is happening. The core inflation rate only looks stubbornly high on an annual basis but if you look at the month-on month changes, the core rate is actually falling - so there is evidence that the pressure is starting to ease. Different ONS figures show private rents have grown at their fastest rate on record in the past year.
It means the average UK property price is now £288,000 - £5,000 higher than 12 months ago, but £5,000 below the recent peak in November 2022.This chart shows how house prices have grown over nearly a decade: "After positive inflation news has brought the potential for a peak in interest rates sooner than previously expected, there is also some hope that fixed mortgage rates will start to fall."Food inflation is easing - but we're still paying significantly more for our groceries than we were a couple of years ago.
And for those looking at a tracker mortgage, today's average two-year rate is unchanged at 6.23%, while the average standard variable rate stands at 7.85%.For savers looking to get the most out of their money, the average one-year fixed savings rate has risen marginally to 5.29% today from 5.28% yesterday.For one-year fixed cash ISAs, the average rate is 5.14% - up from 5.09%, and it's 2.95% for easy-access ISAs.
"It's encouraging that pay is outpacing price growth, but any financial boost is likely to be swallowed up by higher taxes, borrowing costs and rent, so for most people this won't feel like a turning point in the cost-of-living crisis," he says., says the crisis"may finally be beginning to wane" but people across the country are"still under immense pressures".
Inflation has slowed to its lowest point for 17 months, but with wage growth accelerating it's still likely that we'll see the Bank of England hike the base rate again next month.
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