Rishi Sunak says drop in inflation rate shows government's 'plan is working'

19 July 2023, 16:13 | Updated: 19 July 2023, 16:15

The inflation rate has fallen more than expected
The inflation rate has fallen more than expected. Picture: Alamy/Getty

By Kit Heren

Rishi Sunak has welcomed the fall in the inflation rate, claiming that the 7.9% rise in prices shows that the government's "plan is working".

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Wednesday's inflation figure is a fall from 8.7% in May, according to the consumer price index, a method for measuring how fast prices are going up.

While it is still far ahead of pre-pandemic and war in Ukraine levels, the rate of growth is slower than the 8.2% predicted by some forecasters.

The government has vowed to bring inflation down by half by the end of the year.

Mr Sunak said on Wednesday afternoon: "What we saw with the inflation figures is that our plan is working. I know things are difficult for people right now, but I'm determined to bring inflation down.

"Today's figures should give people some comfort that the plan is working. I'm going stick the course."

Rishi Sunak on Wednesday afternoon
Rishi Sunak on Wednesday afternoon. Picture: Getty

Speaking on Wednesday morning as the data was released, the Office for National Statistics' (ONS) chief economist said drops in motor fuel prices brought about the "substantial" slowdown.

Grant Fitzner said this was the lowest annual rate of inflation since March 2022. That was the first month after Ukraine was invaded and sent energy prices soaring.

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Food price inflation has also eased but it remains "at very high levels", he added.

The ONS said he largest downward trend in the rate of increase was in milk, cheese and eggs, easing from 22.8% from 27.4% in May. Rises in the cost of meat products - mostly pork - as well as bread and cereals slowed slightly.

The ONS data shows inflation fell to 7.9%
The ONS data shows inflation fell to 7.9%. Picture: Office for National Statistics

Rishi Sunak pledged to halve inflation as one of his key policy priorities after becoming prime minister. At that time, it was above 10%.

Chancellor Jeremy Hunt said: "Inflation is falling and stands at its lowest level since last March; but we aren't complacent and know that high prices are still a huge worry for families and businesses.

"The best and only way we can ease this pressure and get our economy growing again is by sticking to the plan to halve inflation this year."

Jeremy Hunt welcomed the news but admitted high prices are still a worry
Jeremy Hunt welcomed the news but admitted high prices are still a worry. Picture: Alamy

Read more: Bank of England 'losing control of inflation' as food costs heap economic misery on Brits

Grant Shapps, the energy secretary, said the government's measures to support Brits through inflation are "starting to pay dividends with inflation coming down to 7.9 percent".

But he admitted: "It is still far too high and a big cost, but nonetheless moving in the right direction now."

Shadow chancellor Rachel Reeves said: "Inflation has been persistently high and remains higher than our international peers. This is becoming a hallmark of Tory economic failure.

Markets commentator David Buik on inflation falling to 7.9% in June

"Today's numbers confirm what families across the country already know - that prices are still going up at staggering rates and that they're bearing the brunt of those costs.

"There may be global shocks - but Britain is so exposed to those because of Tory economic failure that has led to a severe lack of security in our economy.

"Only Labour has the plans Britain needs to put our economy on a more secure path - so that families are better off and so we can grab hold of the opportunities of the future."

Attention will now turn to what impact this has on the Bank of England's interest rate rises next month. It increased it by 0.5% to 5% in June.

Financial markets forecast it could climb to 6.25% by March next year.

Samuel Tombs, chief economist at the Pantheon Macroeconomics consultancy, said today's figures were a "watershed moment", and showed the Bank it could opt for a lesser 0.25% rates rise.

He said he expects a sharp fall in food inflation in the third quarter of the year.