Inflation unexpectedly fell last month despite fears about rising petrol prices ahead of the Bank of England’s next decision on interest rates.
The consumer prices index (CPI) dropped to 6.7% in August, down from 6.8% in July, according Office for National Statistics figures released this morning.
The Bank’s own forecast previously predicted that CPI inflation would rise to 7.1%.
Falling food prices were behind the decline, even as motorists contended with rising fuel prices amid a global surge in the price of oil, driven by supply cuts in Russia and Saudi Arabia.
Bank of England Governor Andrew Bailey had suggested earlier this month that inflation could increase given that prices went down in August last year but up this August.
Policymakers will decide whether to raise interest rates from 5.25% tomorrow.
Chancellor Jeremy Hunt says today's news shows the government's plan to deal with inflation is working - "plain and simple".
"But it is still too high," he adds, "which is why it is all the more important to stick to our plan to halve it so we can ease the pressure on families and businesses.
"It is also the only path to sustainably higher growth."
FTSE 100
The UK's top share index, the FTSE 100, was up 42-points at 7,702 shortly after opening this morning, following yesterday's seven-point rise.
Brent crude futures were down 0.93% at $93.48 a barrel.
Companies reporting today
- Dunelm Group (Q4 results)
- M&G (Half year results)