Key Takeaways:
- Inflation in the UK has dropped by 6.8%, according to the latest official figures
- This is significantly lower than the above 10% recorded in January this year
- However, prices of essential goods and services still remain high in the country as the UK economy aims to recover
YEREVAN (CoinChapter.com) — Latest official figures reveal a significant decline in the UK’s yearly inflation rate in July, marking a 15-month low. This decrease, which aligns with economists’ forecasts, is attributed to reduced energy costs.
The Office for National Statistics (ONS) reported that the Consumer Prices Index (CPI) witnessed an annual increase of 6.8%. This is a notable drop from the 7.9% in June. While this development contributes to alleviating the country’s ongoing cost-of-living challenges, it’s not all good news.
The cost of living remains high in the UK despite the dip in inflation
The UK price inflation experienced a decline of 1.1% within a month, edging closer to levels not witnessed since Russia’s incursion into Ukraine in February 2022. Nonetheless, experts cautioned that the challenges posed by the cost of living squeeze persist, despite the recent shift in the trajectory of surging prices.
The deceleration in rising prices has extended over two consecutive months, with wage growth now surpassing these inflationary pressures.
Meanwhile, core inflation, which factors out volatile elements like food and energy costs, remained steady at 6.9%.
Experts warn that elevated borrowing expenses and increased taxes could offset any progress made in pay increments.
Policymakers at the Bank of England could potentially implement another increase in the base rate during their September meeting. According to a report by the Independent, it could exacerbate the difficulties faced by mortgage holders and loan recipients. The rate of the quarter-point rise could be around 5.5%, as per the report.
Analysts welcomed the recent inflation figures. Nevertheless, they emphasized that considerable efforts are still required to address the ongoing challenges posed by the cost of living squeeze.
Chancellor of the Exchequer, Jeremy Hunt, agrees that there is more to be done.
“The decisive action we’ve taken to tackle inflation is working, and the rate now stands at its lowest level since February last year. While price rises are slowing, we’re not at the finish line. We must stick to our plan to halve inflation this year and get it back to 2%,”
he said.
UK Economy still struggles under high prices
Earlier this year, British Prime Minister Rishi Sunak promised to cut inflation in half by the end of 2023. At the time, inflation stood at 10.7%, making his target around 5.3%. It currently stands just below 7%.
While there has been some progress since the 11% peak, it remains way above the 2% target set by the Central Bank.
The inflation rate for the services sector in the country has increased. It spiked from 7.2% to 7.4%, surpassing the Bank’s projection of 7.3%.
A noteworthy shift was observed in rents, which experienced a 1.7% rise between June and July. This marks the most substantial month-on-month alteration in this category since 2005.
Notably, the cost of food in the UK has risen by 14.8% over the last year. Economists attribute the rise to the high gas and energy costs, among other things.
Meanwhile, the latest estimated unemployment rate in the UK stood at 4.2%. This marks an increase of 0.3% compared to the previous quarter. Moreover, this figure is 0.2% higher than the levels seen before the onset of the coronavirus pandemic.
The opposition Labor Party welcomed the drop in UK inflation. However, it used the figures to critique the government’s economic record.
“After 13 years of economic chaos and incompetence under the Conservatives, working people are worse off – with higher energy bills and prices in the shops,”
Rachel Reeves, the Shadow Chancellor, said, according to ITV.
The UK economy is making slow progress. However, higher cost of living and unemployment rates do not allow the change to be felt.
