July’s UK inflation rate eased to a 17-month low, official data showed Wednesday, though prices of services, such as haircuts, hotels, and restaurants, rose faster than in June.

In July, consumer prices increased 6.8% over a year ago, according to the Office for National Statistics. After an energy price cap was lowered by the energy regulator at the end of June, this is the smallest annual increase since February 2022.

While food prices remain high, the inflation rate for milk, bread, and cereal has eased again, according to ONS deputy director of prices Matthew Corder.

The rate of food price inflation slowed in July, from 17.4% in June, with prices still rising strongly, but more slowly than in June.

In less good news, services inflation accelerated from 7.2% in June to 7.4% last month. The fall in goods prices offset that, leaving core inflation unchanged at 6.9%. Unlike volatile food and energy prices, core inflation reflects the overall trend in prices.

As a result of the latest inflation figures, policymakers may be concerned and will realize that the battle against inflation is far from over.

The announcements come on the heels of an official release Tuesday showing the fastest annual wage growth since records began, raising fears of a dreaded “wage-price spiral” when rising wages and prices feed into one another, causing inflation to rise.

As labor costs make up the bulk of service providers’ costs, the Bank of England may feel that more work needs to be done to contain inflation for services,” said Ellie Henderson, an economist at Investec in London.

According to financial markets, there is 90% chance of a quarter-percentage-point hike next month, bringing the benchmark interest rate to 5.5% for the first time since December 2007.

As officials now have a restrictive policy, Jamie Dutta, an analyst at Vantage Securities, believes there will be relatively few rate increases after September.