The CPI including owner occupiers' housing costs (CPIH) also dropped slightly to 6.3% compared to 6.4% in July.

According to ONS data, food and accommodation provided the largest downward contribution to the monthly change in CPIH and CPI annual rates, while rising motor fuel prices provided the largest upward contribution.

Meanwhile, the latest House Price Index (HPI) data — released in tandem with the inflation figures — showed that UK average house prices rose by 6 percentage points in the year to July 2023.

The average UK house price was £290,000 in July, which is £2,000 higher than a year ago, but £2,000 below the peak in November 2022.

Industry experts react to latest ONS inflation and HPI figures

We will be updating this story throughout the day.

1:25pm

Amit Patel, adviser at trinity Finance:

“On the back of the CPI data released this morning, the MPC committee must now take stock and pause increasing the base rate.

“I expect to see further rate reductions from lenders over the coming days on the back of the news released this morning, which is positive news for borrowers who are looking to re-finance.”

10:45am

Douglas Grant, group CEO at Manx Financial Group: 

“Amid concerns that the Bank of England may be encouraged to again raise interest rates, today’s unexpected fall in CPI inflation is positive news.

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“The business sector is not out of the woods yet, and as SMEs account for around half of all private sector turnover in the UK, we need more innovative measures to ensure their survival —  it is more important than ever that SMEs take this as a reminder to review their existing lending structures and ensure they remain ahead of the storm.

“Following the implementation of short-term loan schemes in the last few years, we believe that it is vital that the government continues to expand measures to fuel SME resilience and kick-start growth. We have been advocating for a permanent government-backed loan scheme that is sector-focused and involves both traditional and non-traditional lenders to secure the future of our SMEs.

“As concerns mount over the future of the economy, the significance of implementing a permanent scheme cannot be overstated — it could serve as a critical factor in sustaining economic recovery and, in turn, determine the survival of numerous companies."

George Lagarias, chief economist at Mazars:

 “Inflation is on the mend, the figure comes upon the heels of a significant upward revision to growth.

“While current high rates may continue to reduce economic activity, slowing inflation means that the central bank may unshackle the economy quicker than previously anticipated."

Riz Malik, founder and director of R3 Mortgages:

“The drop in CPI and core inflation has averted the migraine many were expecting due to the recent rise in oil prices. This data, especially the drop in core inflation, is very positive news ahead of the base rate decision on Thursday.

“In fact, rather than waiting until the end of the year, we could see a 'hold' decision sooner than we think — potentially tomorrow — and you can also expect mortgage lenders to continue to reprice downwards, which is great news for borrowers."