UK inflation fell more than expected in July, easing pressure on the Bank of England, according to figures released on Wednesday by the Office for National Statistics.
Consumer price inflation declined to 2% from 2.5% in June, coming in in line with the BoE’s 2% target and below expectations of 2.3%. This marked the first easing in inflation since February.
The BoE had forecast inflation of 2.1%.
Core inflation – which strips out food and energy – fell to 1.8% from 2.3%, coming in below consensus expectations of 2.0%.
Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “Inflation fell back in July across a broad range of goods and services, including clothing, which decreased with summer sales returning after the pandemic hit the sector last year. This was offset by a sharp rise in the price of second-hand cars amidst increased demand, following a shortage of new models.
“The differing patterns of movement restrictions across the last two years have affected headline inflation. Some of this month’s fall came from products and services, such as foreign travel, where real prices were used last year but have had to be imputed this year.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “July’s decline in CPI inflation is attributable to the sharp increase in prices a year ago, when the economy emerged from lockdown and the ONS stopped imputing prices for goods and services that were previously unavailable.
“Looking ahead, the headline rate remains on course to rise sharply, though we think the BoE’s forecast for a 4.0% average rate in Q4 and Q1 is a bit too high.”
