Lower gas and electricity prices drove a sharp drop in UK inflation to 6.8 per cent in July from 7.9 per cent the previous month, the lowest rate of price increases since February last year.

The figure met economists’ expectations and will come as a modest relief after wage data on Tuesday was surprisingly strong, highlighting the work the Bank of England still needs to do to restore price stability.

While the headline rate’s decline showed that prices have been rising at a slower rate in recent months than last year, there was no improvement in underlying price pressures with core inflation – stripping out food and energy prices – still rising at an annual rate of 6.9 per cent.

With the rate of growth in the price of services rising to 7.4 per cent in July from 7.2 per cent in June, there will be no easing of pressure on the central bank to do more to tame price rises. – Copyright The Financial Times Limited 2023