UK inflation slowed sharply for the second month in a row, falling to a 17-month low in July, official data showed Wednesday.

Consumer prices rose 6.8% last month compared with a year ago, the Office for National Statistics said. That is the smallest annual rise since February 2022 and reflects falls in the price of gas and electricity after an energy price cap, set by the energy regulator, was lowered at the end of June.

"Although remaining high, food price inflation has also eased again, particularly for milk, bread and cereal," said ONS deputy director of prices Matthew Corder.

Food price inflation eased to 14.9% in July, from 17.4% in June, with prices still rising strongly last month compared with a year ago but less than in June.

But it was not all good news.

Data published Tuesday showed that wages are growing at the fastest annual rate since records began. And that fast pay growth is contributing to stubbornly high core inflation, a measure that strips out volatile food and energy costs and is a better gauge of the underlying trend in prices.

Core inflation was unchanged in July at 6.9%, with the falling cost of goods offset by higher prices for services, which tend to be more labor-intensive. Services inflation rebounded slightly last month to 7.4%, from 7.2% in June.

"With wage growth and services inflation both stronger than the [Bank of England] had expected, it seems clear that the bank has more work to do," said Ruth Gregory, deputy chief UK economist at Capital Economics.

The consultancy expects the central bank to implement another quarter-percentage-point hike in September, taking its benchmark interest rate to 5.5%.

Jamie Dutta, an analyst at stockbroker Vantage, added: "The bar for more rate rises is relatively high after September as officials now have policy at a restrictive level."

— This is a developing story and will be updated.