The Office for National Statistics (ONS) said its Consumer Prices Index showed inflation hit 9.9% in the year to August, down from 10.1% in July.
A 6.8% drop in fuel prices caused the small reduction. And although it was the most dramatic fall since between March and April 2020, it wasn't enough to make a noticeable dent in July's figure, which was the highest rate in 40 years.
Instead, food prices rose 13.1% in the 12 months to August - the highest rate for 14 years - as well as clothing, and miscellaneous goods and services such as hairdressing and toiletries. In its report, the ONS said of food prices: "The increase in the annual rate between July and August 2022 was driven by price movements across many of the more detailed classes. The largest upward effect came from milk, cheese and eggs, where prices of milk and cheese rose between July and August 2022 by more than between the same two months a year ago."
Clothing and footwear rose 7.6% in the year to August compared to 6.6% in July. However, the ONS noted that prices usually rise at this time of year as the autumn ranges come into shops after the summer sales end, and the sudden jump in inflation is a hangover from the pandemic which upset normal seasonal shopping habits.
Miscellaneous goods and services, which includes hairdressing, toiletries, cosmetics, jewellery, insurance and financial services, rose 4.6% in the year to August compared to 4% in July. The main drivers were rising costs of appliances and personal care.
Second hand car prices rose 4.6% in the year to August, although this is down from 8.6% in July, the ONS said.
UK inflation is the highest among all G7 countries, and it is unlikely to fall to the target level of 2% until the end of 2024, the National Institute of Economic and Social Research forecast.
In its analysis, the research institute said: “NIESR forecasts annual CPI inflation to peak around 11.5 per cent in the first quarter of 2023, and not return to target until the end of 2024.
“With inflation remaining above target until the end of 2024, the labour market now experiencing a slowdown in the demand for candidates and the UK economy expected to stay in recession until the first quarter of 2023, the Bank of England’s dilemma continues to intensify.”
Although the Government has stepped in to cap energy prices at £2,500 for the average household from October, it will still be a large jump from the current cap of £1,971.
George Lagarias, chief economist at accountancy Mazars, said: “Higher energy prices for all the previous months have fully fed into most supply chains and it will take months of lower oil for end-consumer prices to meaningfully come down again. Inflation may well remain a central theme until at least the end of the year.
“However, input costs have begun to drop and we should see this feeding into general prices eventually.”
Previously worrying inflation estimates of up to 20% are unlikely to happen after the Government's intervention on the energy price cap. Without the cap, some had predicted bills could rise up to £7,700 from next year.
Yael Selfin, chief economist at consultancy KPMG UK, said: "The new measures announced by the Government to cap energy prices for households at £2,500 could see inflation peak at a more modest 10.5% in October.
"However, with inflation in near double digits, the combination of expected tax cuts and support measures for households may prompt the Bank of England to take a more hawkish stance to avoid higher inflation further down the line.
"This may result in steeper rate rises and higher rates to counteract the inflationary impacts of the expected fiscal largesse."