Inflation dropped to 6.8 per cent in the year to July, according to the Office for National Statistics.
The continued downwards trend is good news for prime minister Rishi Sunak, who pledged at the start of this year to halve inflation before the end of 2023.
The figure is a significant improvement of the situation at the end of 2022, when inflation had floated around the 11% mark.
Core CPI inflation, which strips out energy, food, alcohol and tobacco, was at 6.9 per cent in the 12 months to July 2023.
That’s slightly higher than the 6.8 per cent which economists expected.
John Glen, chief secretary to the Treasury, welcomed today’s news that inflation as he said the UK is “on course to get to the 2% target” by 2025.
“This is very welcome news today”, Mr Glen told Sky News. “We’re now down to 6.8%, well over a per cent down.
“We’re at the lowest level we have been since February last year. It wasn’t going to be easy, none of the prime minister’s pledges would be easy, but we are focused on taking all those decisions as a government to get us down to half what it was at the start of the year.
“The Bank of England themselves think they’re on course to get to 5% by the end of the year, and then get to 3% by this time next year.”
He said we are “on course then to get to the 2% target by 2025”.
“As I say, this isn’t a straight line process”, Mr Glen said. “There are lots of factors that go into the inflation figures and that’s why the government are working very closely with the Bank of England.
“Getting inflation down is the most important thing the government can do.”
Chancellor Jeremy Hunt reacted to the latest inflation data by insisting that the government’s “decisive action” is working.
He said: “The decisive action we’ve taken to tackle inflation is working, and the rate now stands at its lowest level since February last year.
“But while price rises are slowing, we’re not at the finish line.
“We must stick to our plan to halve inflation this year and get it back to the 2% target as soon as possible.”
Reacting to the data, Labour’s shadow chancellor Rachel Reeves said that “working people are worse off” after 13 years of “economic chaos”.
She added: “Inflation in Britain remains high and higher than many other major economies.
“After 13 years of economic chaos and incompetence under the Conservatives, working people are worse off – with higher energy bills and prices in the shops.
“Labour’s plan to build a strong economy will make working people better off by boosting growth, improving living standards and cutting household bills.”
The IPPR now fears that the recent increases in UK interest rates, to a 15-year high of 5.25%, will drag the economy into a contraction.
Dr George Dibb, head of IPPR’s Centre for Economic Justice, said:
“It’s good news that headline inflation is lower, especially with energy bills coming down, but there is a very real risk that a recession may soon overtake price rises as the main economic concern.
Other countries have brought inflation under control quicker than in the UK, with more support for households and workers avoiding unnecessary pain”.
It remains likely that the Bank of England will further increase interest rates after today’s figures.
It comes as money markets this morning are continuing to bet that the base rate will rise at least 25 basis points in September, before climbing as high as 6 per cent by the end of the year.
The implied rate, effectively a measure of how likely it is the central bank will raise rates, is now around 5.9 per cent after yesterday’s wage increase numbers came in.