The rate of inflation has unexpectedly flattened – primarily due to falling fuel prices – despite predictions it would soar further towards the end of the year.
The consumer prices index (CPI) fell 0.2 percentage points to 9.9% in the year to August, although the cost of living is still rising at a 40-year record rate.
The retail prices index (RPI), the measure of inflation often quoted in pay negotiations, was unchanged compared to the previous month at 12.3%.
The Office for National Statistics said the easing in the annual inflation rate in August 2022 reflected principally a fall in the price of petrol and diesel.
Smaller upward effects came from price rises for food and non-alcoholic beverages – which rose by 13.1% for August up from 12.7% in July – miscellaneous goods and services, and clothing and footwear.
Inflation in 2022
The Bank of England, which delayed its interest rate review following the Queen’s death last week, had predicted that CPI could peak at 13.3% in the coming months, and various banks have predicted even higher inflation in recent weeks.
Liz Truss’s announcement last week of an energy price cap however, starting 1 October, is expected to have dampened inflationary pressures, if only slightly. The new Prime Minister capped energy bills at £2,500 for the typical household per year, for the next two years.
Her new Chancellor, Kwasi Kwarteng, is expected to deliver a mini-budget late next week, before MPs break for party conferences, which is also expected to introduce measures to tackle the cost of living.
TUC general secretary Frances O’Grady said: “Inflation is still very high and hitting family budgets hard. The Chancellor’s mini budget next week should use the power of government to help with surging costs this winter.
“He should fund a proper cost of living increase for public sector workers. He should bring forward an immediate increase to the minimum wage this autumn. And he should boost universal credit now, instead of waiting until April for the next rise.”
Dr George Dibb, head of the Centre for Economic Justice at IPPR, said: “Many people will welcome CPI inflation easing slightly this month, falling from 10.1% to 9.9%, including the Bank of England who are deciding whether to raise interest rates next week. However, this headline figure has been pulled down by falling petrol prices, and it hides worrying news that the prices of food and clothing are continuing to accelerate upwards.
“High inflation means high prices, and without intervention this will lead to more hardship, more poverty and more destitution. The government’s price cap on energy for households and businesses is a welcome step but it won’t instantly reduce the inflation in essentials such as food and clothing that we see today. This goes to show why the price cap policy alone is not enough. The most vulnerable households on the lowest incomes still require more support through the welfare system.”