Inflation drop blunted by concern that the core rate is entirely unchanged

Commenting on today’s data from the Office of National Statistics, that showed the annual rate of CPI inflation falling to 6.8% in July from 7.9% in June 2023, with core inflation remaining unchanged at 6.9%, Dr Roger Barker, Director of Policy at the Institute of Directors, said:

“It will be a relief to business leaders that the headline rate of inflation is continuing its downward trend.

“However, any celebrations will be blunted by concern that the core rate of inflation, which excludes energy and food prices, is entirely unchanged. This month’s headline drop was primarily a result of the scheduled readjustment of the energy price cap.

“It’s hard to avoid the conclusion that inflation has to some degree become embedded into the behaviour of businesses and consumers. This was reflected in yesterday’s figures for annual wage inflation. Getting back to the Bank of England’s 2% inflation target will be a challenging process.”