UK Inflation CPI Falls to 6.8% pa

Published / Last Updated on 16/08/2023

The Office for National Statistics (ONS) has this morning (7am) released Consumer Prices Index (CPI) inflation figures for July 2023 and it has fallen by 1.1% from 7.9% pa in June to 6.8% pa in July 2023.  This follows a similar fall in June of 0.8% from 8.7% pa in both April and May 2023 to 7.9% pa.

  • Lower gas and electricity prices were the biggest contributors to the downward movement, but food prices still increased in July 2023 but by less than in July 2022, also leading to an easing in the annual inflation rates.
  • CPIH which is inflation including housing costs also fell to 6.4% pa in July from 7.3% in June.

Clothing, footwear, household goods and services, were big contributors to the falls and communications fell by a significant 2.5% pa.

Old Inflation Measure - Retail Prices Index (RPI): What’s the difference between RPI and CPI?

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) fell a huge 1.7% in July to 9.0% pa from 10.7% pa in June after last month’s shock increase.  It tells us that mortgage interest payment increases are slowing as well as other housing costs such as road fund license and council tax.  We prefer RPI as a measure as it tells us that things are tighter for us all when looking at whole expenditure but we understand the Government’s desire not to use RPI as an official national statistic because it would become a ‘vicious circle’ if the Bank of England was using RPI as the benchmark to judge increasing interest rates to bring inflation down because any increase in interest rates would, by default, push RPI up.


Many will be calling for a slowdown in interest rate increases but given news earlier this week that average wages inflation (i.e., pay rises) is now up at 7.8% pa means that even greater pressure is on the Bank of England to increase rates even further from 5.25% to possibly 5.75% or even 6.0% pa on 21st September to stop the economy overheating as people have slightly more money in their pockets pushing prices up.  The Bank of England should try and avoid what is happening in the US with inflation starting to rise again due to better jobs and employment data.

Inflation is still higher than desired and central banks may have to force economies into recession to bring inflation truly under control and this has spooked stock markets so far over the last few days.

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