Pressure on UK household spending has eased a little after consumer price inflation dipped in June, but questions remain about the depth of the current inflationary cycle, and how the Bank of England should react.
Many analysts believe the dip in the consumer price index (CPI) is only temporary as the pound's depreciation this year continues to lift import prices.
Nevertheless, the central bank's most recent inflation forecasts – which predicted that CPI would end the year at 2.8% – are now looking more realistic.
Tuesday data show that CPI fell to an annual average of 2.6% in June, down from 2.9% in May. Analysts had expected CPI to remain at last month's 2.9% level.
Falling petrol prices probably had the largest impact, while secondary effects from summer clothes sales also likely lowered the pressure on consumer prices.
This gives some welcome relief to households struggling under the impact of low wage growth. For several months, CPI has outpaced average earnings growth, which fell to 1.8% in May from 2.1% in April.
So, in spite of the 0.3 percentage point fall in CPI in June, the gap in real wages is back up to 0.8 percentage points.
Much of this year's inflationary pressure has come from the weak pound – down about 10% against the dollar since last June's referendum on European Union membership returned the decision for Britain to leave.
A weaker domestic currency is a boon to exporters, making their goods more competitive in foreign markets.
But as a net importer the UK's reliance on foreign goods is accelerating – its trade deficit widening to £8.9bn in the three month's to May, from £6.9bn previously.
This love affair with overseas goods has had a broad impact on inflation since the Brexit vote, and sterling's reaction.
In reaction to the data published on Tuesday, the pound has overturned earlier gains against the dollar to stand 0.2% lower at $1.3031 and fell 0.8% against the euro to €1.1286.
Inflationary pressures persist
Many analysts believe that any dip in inflation is likely to be temporary and the Bank of England's dilemma over rising CPI and low wage growth is far from over.
"The bad times for Britain’s savers, caught between historically low interest rates and stubbornly high inflation, are far from over," says Ross Andrews at Minerva Lending.
He adds: "Inflation may have fallen back a few notches but many expect the cost of living to rise again before the year is out."