UK inflation falls slightly to 9.9% but remains close to 40-year high

The rate of Consumer Prices Index (CPI) inflation fell to 9.9% last month from 10.1% in July but remained close to the highest rate in 40 years, according to the latest data from the Office for National Statistics (ONS).

Inflation eased because of a monthly fall in petrol and diesel prices, while food and clothing became more expensive. Economists had expected a further small rise to 10.2% in the headline rate.

Prices rose by 0.5% in August when compared to July, according to the ONS.

Food and non-alcoholic beverages prices made the largest upward contribution to the monthly rates in August 2022, while falling prices for motor fuels resulted in a large downward contribution.

The annual rate for motor fuels eased from 43.7% to 32.1% between July and August.

Paul Dales, Chief UK Economist at Capital Economics, commented: ‘Overall and core UK CPI inflation haven’t peaked yet. As such, the Bank of England will have to continue turning the screws.

‘We think CPI inflation will peak around 11.0% just before the end of the year, and that core inflation will continue to edge higher too. That means the Bank will have to continue raising interest rates from 1.75% now to 3.00%, if not higher.’