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Official figures showed inflation has slowed to 6.8% - down from a peak in October of 11.1%, but with signs that the rate of price rises remains stubbornly high, analysts say we're still likely to see interest rates go up in September.

Want to read more?

• There's a full write up here, including the all the key numbers and reaction to today's figures
• You can read more on the rising cost of renting here
• Not sure exactly what inflation is and why it's been so high - try our explainer, here
• Thinking abour your own finances? See how you're affected with our inflation calculator here, or find personalised money-saving tips in our guide here

This page was edited by Heather Sharp and Emily McGarvey. The writers were Jamie Moreland, Barbara Tasch, Malu Cursino, Jacqueline Howard, James Harness, Thomas Mackintosh and Emily Atkinson.

We're about to close our live coverage, but here's a look at some of today's key developments:

• Inflation in the UK slowed to 6.8% in the year to July, down from 7.9% in the year to June, brought down largely by lower energy costs

• Prime Minister Rishi Sunak says it shows his government's plan is working, though Chancellor Jeremy Hunt says ministers' work is not finished
• Labour's shadow chancellor Rachel Reeves points out that inflation in Britain "remains high and higher than many other major economies"
• Analysts and charities said households were still feeling the impact of the rising cost-of-living, and the Institute for Fiscal Studies think tank said Sunak's pledge to halve inflation by the end of 2023 was "in jeopardy"
• This is partly because core inflation - a measure which looks at price rises excluding food and energy - remained unchanged
• Today's figures - together with data on rising wages published yesterday - increase the likelihood that the Bank of England will raise interest rates again next month

Michael Race
Business reporter, BBC News

While today’s figures show inflation has slowed, economists are still expecting interest rates - the tool used by the Bank of England to control price rises - to be raised further.

That’s because of the nature of July’s inflation fall.

The biggest driver of the drop in the rate of price rises was down to energy prices easing. Wholesale costs spiked previously due to global gas prices soaring, particularly after Russia’s invasion of Ukraine.

But once you take energy, and food prices, out of the inflation figures, so-called “core inflation” was unchanged in July.

Core inflation is a the measure closely watched by the Bank of England, and because it’s remained at 6.9%, analysts think this will lead to interest rates rising again in September.

Image source, .

Sunak's inflation promise crucial as election loomspublished at 12:58 British Summer Time 16 August 2023

12:58 BST 16 August 2023

Helen Catt
Political correspondent

Rishi Sunak has repeatedly stressed that halving inflation this year is his top priority.

He's also been clear it has to happen before he'll consider tax cuts or the sort of giveaways that a government likes to make in the run-up to an election.

So, politically, it's a pretty crucial promise for him to keep.

His assessment of today's figures is upbeat. The plan, he says, is working.

But the measures the government can take directly to speed the fall in inflation are limited.

The Chief Secretary to the Treasury John Glen tells me some of it is about making "active choices" to keep a tight rein on the finances and saying "no" to his colleagues' spending requests.

A lot of the impact, though, is coming from things ministers can't control, like falling energy prices.

The think tank the Institute for Fiscal Studies suggests the government may, therefore, struggle to tackle the more stubborn problem of inflation on goods and services and so hitting the ultimate target is not a given.

What's the outlook for pensioners?published at 12:54 British Summer Time 16 August 2023

12:54 BST 16 August 2023

Kevin Peachey
Cost of living correspondent

The last couple of days have given us a better idea of what will happen to the state pension when it rises in April.

Government policy means the state pension goes up in line with the highest of average wages, inflation or 2.5%. That is known as the triple lock.

It is next month’s wage data and the following month’s inflation figures that are used in those calculations.

However, the latest set of figures signal that wage growth remains relatively high and rising - potentially heading higher than the inflation rate. It is too early to say, but a rise of 8% in the state pension looks a possibility.

Pensioner groups say the total state pension remains relatively low compared with some other countries.

Image source, Pool

Halving inflation is the “number one priority,” says Rishi Sunak. The plan to bring down inflation is “working“ says the prime minister but “we’re not there yet”.

“Inflation is not some abstract economic concept… it’s very real,” Sunak tells Topps Tiles staff during his visit to Leicestershire.

He says there are “three quick things” he can do to make it happen.

Sunak says he will be “responsible” with spending, taxes and borrowing, even if it makes his life “tricky in the short term”.

Secondly, Sunak says the UK needs to increase its “supply of things”, like energy production “here at home”.

The PM says he is reforming the welfare system to support people entering the workforce, which will help businesses struggling to recruit staff.

Sunak’s third commitment is to help people “get through” the period of high inflation“, like we did with energy bills”.

“We’re doing lots of other things” to help, says Sunak, citing cuts to fuel duty, caps to bus fares outside London, and support payments for people on Universal credit and pensioners.

Earlier, Labour's shadow chancellor Rachel Reeves said UK inflation "remains high and higher than many other major economies" and said people were worse off "after 13 years of economic chaos and incompetence".

Image source, PA

Today's fall in inflation is welcome but provides "little respite to the 3.1 million low-income families", a UK poverty charity says.

Alfie Stirling, chief economist at the Joseph Rowntree Foundation (JRF), is concerned policymakers will take their "eye off the ball" as inflation drops, while families continue to make sacrifices on essentials like food, basic toiletries and adequate clothing.

A total of 5.6 million low-income households owe more than £14bn in unsecured lending like credit cards, overdrafts and personal loans, says Stirling.

"With interest rates continuing to rise, these families are exposed to a double pinch; first from the rising costs of essentials, and then from the rising cost of money itself," he adds.

Stirling urges the government to "do more to protect living standards both now and for the future".

After a busy morning, it's high time for a round up of those key inflation figures published this morning by the Office for National Statistics (ONS).

Here goes...

• The rate of inflation - which measures price changes over time - slowed to 6.8% in the year to July, down from from 7.9% in June
• The fall is attributed to lower energy costs, but price rises in other areas have led to expectations of a further hike in interest rates
• Price rises for staple food items like milk, butter, bread, eggs, cereal and fish eased, but overall, food still costs almost 15% more than one year ago
• Among the largest increases was the rise in the price of air travel, which went up by 29.8% in the year to July, up from a 26.7% rise in the year to June
• Core inflation, which strips out the price of energy, food, alcohol and tobacco, remained unchanged in July at 6.9%.

• And while wages have been failing to keep up with rising prices for some time, figures on Tuesday revealed they rose 7.8% annually between April and June

Image source, Supplied

The managing director of haulage company Freightlink Europe Lesley O’Brien, OBE told BBC Radio 5Live’s Wake Up to Money: “Whenever we hear inflation figures or interest rates it impacts on my industry.

"People get scared and they stop spending, business gets tighter and competition gets tougher.”

The company, which covers the whole of UK, also struggled with driver shortages and high wage costs.

O’Brien said: “Ultimately ever-increasing salary, finance, maintenance, insurance and fuel costs cannot be absorbed. All have to be passed onto the end consumer and impacts on the price of goods on our supermarket shelves.”

Young adults are showing “remarkable resilience in saving efforts”, a Yorkshire Building Society survey suggests.

It says the average 18 to 34-year-old has more than doubled their monthly savings in the last five years, from £127 to £321, based on a survey of 2,000 adults by Opinium Research.

The YBS said its data depicted a generation "weathering the cost of living storm", and said young people seemed to be becoming more financially conscious, taking advantage of higher interest-rate savings accounts and exploring various products to help them save.

It also said more than two in five young adults had lent money to friends or family struggling with the cost of living - but also noted an increase in parents and grandparents using their own savings to help their children and grandchildren with mortgage deposits and payments.

However, the YBS said in general, across all ages, the number of people unable to save at all had doubled since 2019, and the rising cost of living still “hinders young adults from establishing a strong financial foundation”.

Kevin Peachey
Cost of living correspondent

For the first time in a while, the prospects for savers are looking a little better.

Returns offered by banks and building societies have improved, not least because providers have been read the riot act by regulators and MPs.

At the same time, falling inflation means that the buying power of existing savings isn’t being diluted at quite the same rate as previously.

However, experts say that as more interest is generated from savings, a greater number of people could be drawn into paying tax.

A freedom of information request by investment platform AJ Bell suggests 2.7 million people could pay tax on savings this year - one million more than last year, according to HM Revenue and Customs (HMRC) estimates.

Tax is paid when interest on cash savings exceeds £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. This is usually shown up during self-assessment, or in a letter from HMRC.

Noor Nanji
Business Reporter

Image source, EPA

Pay is going up, inflation is going down. That’s good news, right?

In theory, yes. But as is often the case with economic data – it’s not that simple.

We can’t directly compare the two data releases we’ve had this week, as they are for different periods.

Yesterday’s figures from the Office for National Statistics showed regular pay growth rose by 7.8% in the April to June period.

And inflation, as we’ve been reporting today, eased to 6.8% in the year to July. But that means prices are still rising, though at a slower rate.

And that means millions of households will still be struggling with the cost of living, having already endured below-inflation pay growth for some time.

Stronger wages will also stoke fears that price rises will take longer to ease.

All of this outlines how complicated the picture is for the Bank of England, when it comes to making decisions about interest rates.

Read more: What is the Bank of England and why does it change interest rates?

Tony Hague is the boss of robotics company PP Control & Automation, which manufactures control systems for industry.

He says inflation has put the business under pressure over the last few years. “We work in contract manufacturing so our margins are relatively thin. So any increase in input costs has been hard to swallow.”

Asked what help he would like to see from the government for the manufacturing sector, he says a better sense of an industrial strategy.

"You look at other developed nations, you look at, for example, in Germany, there's a much longer term approach and government support for manufacturing in general, supported by government, supported by local congress, or supported by the banks.

“Whereas in the UK, everything's too short term, both from the government side and in terms of investments."

Kevin Peachey
Cost of living correspondent

Image source, Getty Images

The ONS has also published figures today on the rising cost of renting and house prices.

In news that will be of little surprise to tenants, the figures show, external that there was a 5.3% rise in prices paid by UK renters in the year to July. That is the highest level since comparable records began in 2016.

High demand at the same time as landlords reducing the number of available properties is most likely to be behind the increase.

There was a 5.5% increase in London, which the ONS also said was the only region where house prices had fallen, external.

There were also big rises in rent in Wales, where the average was up 6.5%. In Northern Ireland, where the data is collected slightly differently, there was a 9.2% increase in the year to May, although this was lower than it has been.

Image source, PA Media

It's holiday season, but digging a little deeper into today's inflation figures reveals less good news if you're planning a getaway.

The ONS said hotels and air travel provided the largest "upward contributions" to July's inflation rate - which means their prices rose faster than other goods and services.

Passenger transport by air rose an eye-watering 29.8% in the year to July 2023, up from 26.7% in the year to June 2023.

For restaurants and hotels, the annual rate rose to 9.6% in July, up from 9.5% in June.

Much of this was driven by accommodation services, which includes things like hotels, hostels and B&Bs, seeing a 12.2% rise in the year to July, up from 11.3% in June.

And it's worth noting that this comes on top of our report back in June, on the soaring costs of package holidays in Greece, Spain and Turkey.

The ONS calculates the inflation rate by looking at the cost of more than 700 goods and services many of us use in our day-to-day lives.

Each month, the ONS gathers data on the cost of these items across different outlets to work out the inflation rate.

Once a year, the ONS reviews the so-called inflation basket to make sure the items it's looking at are relevant to and representative of society. For example, earlier this year, it stopped looking at the price of digital cameras and alcopops, and started taking e-bikes and frozen berries into consideration.

Electricity, gas and other fuels took up nearly 4.9% of the inflation basket used this year - and so to calculate today's rate. That's the highest share for over a decade.

This means changes in fuel price will have a greater impact on how quickly the inflation rate comes down.

Image source, .

Star McFarlane
BBC Breakfast

Ethan tells the BBC that higher inflation has “definitely affected him” and his family.

He’s a university student but says it’s been harder and harder for his parents to support him during his studies. “It just makes everything all round more difficult, when you’re not earning as much money and they’re not. It gets a bit stressful.”

He says that any time he pays for something in a shop it tends to be “way more than I’m expecting”.

“I’m very surprised nowadays when I get a bargain somewhere, or something’s reasonably priced.

He says it's a case of "accepting it’s an average £6 a pint pub and it never really used to be like that”.

Kevin Peachey
Cost of living correspondent

A falling rate of inflation should signal the likelihood of fewer, if any, further rises in the Bank of England's benchmark interest rate.

In turn, that should mean potential cuts in the interest charged on fixed-rate mortgages, which would be a relief to many homeowners and buyers.

But it isn't as simple as that.

Relatively high wage increases revealed in official figures yesterday suggest that the Bank of England may need to keep squeezing.

So, analysts today are cautious in their predictions. While they suggest recent slight drops in mortgage rates could continue, they say any significant fall looks very unlikely any time soon.

Have you been feeling the pinch? We want to hear how rising prices are affecting you.

Have you been worried about the price of your weekly shop, or altered your holiday plans because of the cost-of-living squeeze? Or are you a homeowner with a mortgage or a renter who's seen their housing costs increase as interest rates have gone up?

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• Email: yourquestions@bbc.co.uk
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Helen Catt
Political correspondent

The Treasury will be pleased with the drop in inflation.

It acknowledges a lot of the factors behind the fall - such as gas prices and interest rates - are not in the government’s control.

However, it also suggests decisions made by the government have been the right ones.

Opposition parties are keen to point out people are unlikely to feel any better off though.

They say the scale of price increases over the last couple of years has left households down by hundreds of pounds a month.