The Bank of England has been tipped to lift its base rate of interest but once more after official figures confirmed inflation slowing to a 17-month low.

The Office for National Statistics (ONS) stated on Wednesday (August 16) Consumer Prices Index inflation was 6.8 p.c in July, down from 7.9 p.c in June, marking the bottom fee since February 2022.

Chancellor Jeremy Hunt welcomed the news as an indication efforts to sort out inflation are working although the studying nonetheless represents a pointy improve in the price of dwelling. Analysts had predicted inflation of 6.7 p.c for July.

The newest inflation determine raises questions over what the Bank of England will do in response because it prepares to announce its subsequent rate of interest transfer. Financial market projections consider a peak of between 5.75 p.c to six p.c.

Core inflation nudging increased in July and a file improve in wages for the three months to June will come as a disappointment to the Bank of England, which is extensively predicted to extend charges to five.5 p.c at its subsequent assembly on September 21.

Julian Jessop, Economics Fellow at free market assume tank the Institute of Economic Affairs, accused Threadneedle Street of trying backwards slightly than pausing to gauge the influence of its previous fee rises.

He stated: "The inflation data shows a welcome fall in the headline rate, but core inflation that excludes food and energy remains stuck at 6.9 per cent.

"The headline fee can also be prone to tick up in August, reflecting increased gasoline and alcohol costs, some unhelpful base results, and the continued power of the labour market.

"There are still plenty of reasons to expect inflation to tumble over the rest of the year, notably the sharp slowdown in money and credit growth. Rising unemployment and falling vacancies suggest wage pressures will soon peak too.

"Unfortunately, the Bank of England continues to look backwards on the headline information during the last month or two, slightly than pause to evaluate the influence of the substantial tightening in coverage that's already in place. This makes one other pointless rate of interest improve extra probably."

Analysts have said previously that the Bank of England wants to spark a recession in order to bring inflation back to the central bank's mandated two percent target.

But on Tuesday (August 14) figures showed wage increases soaring to a record high - though they were still being outpaced by inflation - piling more pressure on the beleaguered central bank.

Official statisticians also revealed yesterday that the UK's unemployment rate increased from 3.9 percent to 4.2 percent in the three months to June. The number of people with long-term sickness also increased to a record high.

One analyst said the new data will likely give Bank of England decision makers a "migraine" as it heaps further pressure on them to keep hiking interest rates.

Martin McTague, National Chair of the Federation of Small Businesses, said: "While a drop in inflation supplies some consolation, as we speak's figures present much less of a drop in inflation than hoped for, and can renew fears of a wage-price spiral, and of but extra base fee hikes in future.

"The worry now is rising wages ignite a fresh wave of inflation in September, which will threaten the momentum from June's GDP growth."

James Smith, analysis director on the Resolution Foundation, stated inflation has fallen quickly over the previous six months, however the UK nonetheless has the very best fee within the G7 and the Bank faces a "daunting task" in additional taming worth pressures.

He added: "Accelerating pay growth will make even the Prime Minister's promise to halve inflation hard to meet, let alone the Bank's mandate of reducing it to two percent."