Inflation is slowing but don’t rule out another interest rate hike

Jeremy Hunt has been warning for weeks that inflation could rise over the summer due to an increase in fuel prices. Economists said much the same: the consensus was that the headline rate would jump to 7.1 per cent on the year in August. But this morning the Office for National Statistics (ONS) revealed that the rate of inflation continued to slow last month: rising to 6.7 per cent on the year in August, down from 6.8 per cent in July. This is a rare occasion where ministers have under-promised on the inflation figures, triggering headlines like ‘surprise fall.’

In truth, it’s the smallest of dips – and prices are still going up, just at a slower rate – but it keeps the government largely on track with the Bank of England’s forecast that would see inflation (just) halve by the end of the year.

There’s been some movement in the core inflation rate too, rising by 6.2