UK inflation edges lower

Inflation showed a slight drop last month falling to 2.5% in August, from 2.6% the previous month. The decline came as furniture prices, gas and electricity bills and clothing costs rose by less than a year ago.

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UK inflation falls but high fuel prices put upward pressure on cost of living

Inflation edged lower last month as higher petrol pump prices were offset by softer clothing costs and utility bills, official figures revealed today.

The consumer price index (CPI) rate of inflation fell to 2.5% in August, from 2.6% the previous month, the Office for National Statistics (ONS) said.

The decline came as utility bill and clothing costs rose by less than a year ago, the ONS said.

But the rising cost of fuel maintained upward pressure on the cost of living and is likely to increase fears that the rate of inflation will not fall as rapidly as hoped by the Bank of England, maintaining the squeeze on struggling households.

UK inflation rates fall

Inflation rates in the UK have fallen. Below is the latest from the Office for National Statistics:

  • The headline rate of retail price index inflation fell to 2.9% from 3.2% in July
  • The rate of consumer price index inflation fell to 2.5% in August, from 2.6% in July
  • The underlying rate of retail price index inflation fell to 2.9 % in August from 3.2% in July

Bank of England hopes inflation will resume downward trend

Inflation has come down a long way since its high point of 5.3% in September last year, but it is still some way off the Bank of England's target of 2%.

Most economists saw July's disappointing figure of 2.6% as a bump in the road, and expect the gradual downward trend to continue.

But higher food and petrol prices could jeopardise that, as could further energy price hikes this autumn. Higher university tuition fees will also add to inflation next month.

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Will food prices rise in response to poor harvests?

Droughts, particularly in the US, have sent the price of grains up Credit: Andrew Matthews/PA Wire

The is summer has seen one of the most devastating droughts in the US in living memory, as well as poor harvests in the UK.

Both factors raise the price of grains, however, consumers have so far been shielded from these shifts.

The August food price index from the British Retail Consortium remained unchanged from July, although there is a risk that food prices could be affected in the months ahead.

Prices at the pump raising cost of living

Expensive petrol has a big impact on the cost of living Credit: Danny Lawson/PA Wire

Although the inflation rate for August is expected to show a slight drop, prices at the petrol pump are keeping up the pressure on consumers.

The steady rise in the price of oil since its June low is expected to exert upward pressure on the cost of living over the coming months.