The Consumer Prices Index rate (CPI) of inflation has declined to 1.7 per cent over August, slipping below the Bank of England’s 2 per cent target and hitting the lowest level since December 2016.

Figures published by the Office for National Statistics (ONS) revealed that CPI fell from 2 per cent to 1.7 per cent over August, the sharpest decline since December 2014. In addition, the CPI including owner occupiers’ housing cost (CPIH) also decreased, from 2 per cent in July to 1.7 per cent in August.

The ONS said that between July and August, most broad groups made a negative contribution to the change in the CPIH 12-month rate, with only food and non-alcoholic beverages producing an offsetting upward trench.

The largest downward contribution, of 0.15 per cent, came from recreation and culture, which more than reversed the upward contribution of 0.08 per cent between June and July this year.

Within the group, the largest effect (0.09 per cent) came from games, toys and hobbies, particularly computer games, where prices overall fell by 5 per cent between July and August.

There was also a large downward contribution from clothing and footwear, with similar trends from restaurants and hotels, housing and household services, and alcohol and tobacco.

The largest, offsetting, upward contribution (0.03 per cent) to the change in the CPIH 12-month rate came from food and non-alcoholic beverages.

Commenting, Aegon pensions director, Steven Cameron, said: “The sharp deceleration in price increases for the year to August means price inflation falls to 1.7 per cent, below the Bank of England’s target of 2 per cent and the lowest level since December 2016.

“The annual rate drops from 2.1 pent in July, this is the sharpest monthly fall since December 2014.

“UK consumers should feel a boost from this drop, especially those in work as the latest figures for total earnings growth show an annual increase of 4 per cent to July.

“However, with the latest Brexit deadline looming next month and with the threat of a sustained increase in the cost of oil following the disruption of oil supplies in the Middle East, future trends in inflation remain particularly hard to predict.

“With uncertainty ahead, it always pays to have some extra savings put aside to meet any future pressures on household budgets.”

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