Inflation falls to 9.9% after petrol price declines in August – what it means for your money

THE UK’s rate of inflation dropped slightly to 9.9% in August from 10.1% due to a fall in petrol prices, new figures reveal.

The data from the Office for National Statistics (ONS) reveals the rate went down compared to July, but is still close to a 40-year high.

Experts had expected the figure to stay the same between the two months.

The Bank of England has said inflation could reach 13% this year.

The 6.8% drop in petrol and diesel prices was the highest since between March and April 2020, at the start of the coronavirus pandemic.

The ONS said smaller, upward increases in inflation came from the rising price of food and drinks and clothing and footwear.

Inflation is what goods and services are worth in a country.

If it is higher, that means everyday essentials such as food are more expensive.

The soaring rate reflects the current cost of living crisis, with millions of people struggling with rising energy bills, petrol prices and grocery costs.

Jack Leslie, senior economist at the Resolution Foundation, said: “High inflation continues to drive Britain’s cost-of-living crisis, but the outlook has brightening considerably over the past week.”

He added: “However, high inflation is set to be with us for some time, particularly for low-income who continue to be hit hardest by high prices.”

The latest figures show a 0.2% drop in inflation compared to July, when it hit 10.1%.

That was the largest figure since 1997 and drew fears from the Bank of England (BoE) Governor the UK economy could be heading for a 15-month recession.

It comes after Prime Minister Liz Truss announced a price freeze on energy bills, meaning the average household will pay around £2,500 a year for bills from October 1.

They were due to rocket to £3,549 on average per year after the regulator Ofgem revealed its new price cap.

What does it mean for my money?

Rising inflation indicates that the cost of goods and services is rising, so your money won’t count for as much as it did before.

With inflation 10.1% in July, households were seeing prices rise at the fastest rate for years.

But with the rate dropping to 9.9%, it’s means your cash will go a little bit further.

Prices on everyday items such as food and petrol will remain high for now though, as 9.9% is still very high historically.

Worker’s wages are stagnating as well, as they fail to keep pacing with soaring inflation.

Data from the ONS revealed yesterday, September 13, that workers are facing a “real terms” pay cut.

The Bank of England upped interest rates to 1.75% in a bid to try and tackle soaring inflation.

It’s good news if you have lots of savings put away, but it means higher monthly mortgage repayments for first-time buyers.