Inflation falls more than expected to 7.9% - what does it mean for you?

The rate of price rises in the UK has fallen from 8.7% to 7.9% in the past month, according to official figures from the Office of National Statistic (ONS).

The drop is lower than experts predicted which will bring some welcome relief to families struggling with the cost of living.

While prices are still rising, the Office for National Statistics said the rate of increase had ‘slowed substantially’ to its lowest annual level since March 2022.

But it is still well above the Bank of England’s official 2% target, which will mean further interest rate rises are likely over the coming months.

 

What does the inflation data track?

The CPI inflation data is released by the Office for National Statistics (ONS) each month and measures how the price of goods and services have changed over time. It monitors the cost movement of 700 everyday items – essentially it works out how much it costs you to fill your shopping basket, heat your home or fuel your car month by month.

 

What’s driven this month’s drop in inflation?

The ONS said falling fuel prices were the biggest driver behind the drop this month.

The average pump price of a litre of unleaded petrol is 143.9p – down from 187.01p last June. While diesel is at 145.46p, which is 47.84p cheaper than this time last year.

The cost of food is still stubbornly high though, falling slightly to 17.3% from a high of 18.7% in May.

Core inflation – the price of rises that don’t include food and fuel – fell for the first time since January to 6.9% from last month’s 7.1%

 

What impact does inflation have on me?

When inflation is higher, you’re paying more for something compared to when it is lower. E.g. if a loaf of bread cost you £1 last year and inflation is 5% it’ll cost you £1.05 this year.

Essentially, high inflation means that you’ll not be able to buy as much with your money.

This is made worse if inflation rises faster than wage growth as you’ll need to spend more of your salary on everyday essentials, leaving you less money to live on each month.

 

How can inflation be controlled?

There’s a number of ways to inflation can be controlled.

The Bank of England’s main method of tackling the problem so far has been to raise interest rates.

This makes it more expensive for people to borrow and more beneficial to save, therefore discouraging spending and bringing costs down.

Other alternatives include controlling the prices customers are charged, controlling wage increases, and higher taxes.