1 of 2 | Headline consumer inflation fell by 0.1% to 6.7% despite a surge in petrol and diesel prices but remains far above the central bank's 2% target and the highest among the advanced economies. File photo by Andy Rain/EPA-EFE
Sept. 20 (UPI) -- British inflation unexpectedly fell in August as the pace at which food prices rose slowed, helping cut the annual Consumer Prices Index to 6.7% despite a surge in energy costs, the country's main statistical agency said Wednesday.
However, the fall was just 0.1% from 6.8% in July due to the "large downward effects" of prices of restaurants and hotels, food and non-alcoholic drinks, recreation and culture and furniture and household goods being offset by rises in gasoline, alcohol and tobacco and communication, Office for National Statistics figures show.
The speed at which restaurant and hotel prices rose slowed to 8.3%, compared with 9.6% in August 2022, while recreation and culture prices rose by 5.8% in August, down from 6.5%.
But the inflation rate for food and non-alcoholic drinks remained at a high 13.6%, despite slowing by 1.2%.
Closely watched core inflation, which strips out volatile items such as energy, food, alcohol and tobacco, slowed to 6.2% in the 12 months to August, down from 6.9% in July.
"Core inflation slowed this month by more than the headline rate, driven by lower services prices," ONS Chief Economist Grant Fitzner said.
The CPI services annual rate slowed from 7.4% in July to 6.8%.
Fitzner explained that the rise in gas and diesel prices was more perceived than real due to an anomaly caused by the comparison the annual calculation makes with August 2022 when prices dropped sharply, following record prices seen in July 2022.
Chancellor Jeremy Hunt welcomed the figures, saying they showed the government was on track to deliver its pledge to halve inflation by the end of the year.
"Inflation never falls in a straight line but it's now down 40% from it's peak. The plan is working," he said.
"But we need to stick to it: Even at 6.7% there's still immense pressure on family budgets. That means no borrowing binge, which would simply keep interest rates higher for longer."
The inflation numbers against a backdrop of flat economic growth present a quandary for the Bank of England's interest rate setters when they meet Thursday to decide whether to cut, hold or continue to bear down on inflation by hiking rates for a 15th consecutive time.