Interactive Investor

Fall in UK inflation to 6.7% could mean predicted rate rise is last for a while

interactive investor comments on August's inflation reading ahead of tomorrow's Bank of England interest rate decision.

20th September 2023 07:54

Myron Jobson from interactive investor

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The latest inflation reading defied expectations – but in a good way. The rate of price rises fell by a modest 0.1 percentage point from a reading of 6.8% in July, despite a sharp rise in fuel prices. This marks the sixth consecutive monthly fall in prices - a psychological milestone that will make many Britons feel good about where prices are heading.

“Crucially, core inflation, the pared-down measure, which excludes volatile food and energy prices, fell for the second month in a row. This reading matters because Bank of England policymakers monitor it to get a sense of inflation’s momentum. It means that the widely touted rise in interest rates tomorrow may well be the last increase for a while.

“Prices are heading in the right direction, but it’d be premature to declare victory over inflation. The road to rein in inflation remains an uncertain one.

“Price increases in everyday expenditure like food and energy have cooled notably over the summer months, providing some breathing room for households that have struggled to keep on top heftier bills. Even with falling inflation, economic conditions can change. It remains important to keep tabs on your spending habits, ensuing that you have enough money stashed away in a rainy-day fund. The rule of thumb is to aim to hold three to six months' living expenses in cash.”

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