The largest contributions to the fall in the rate came from air fares, price movements in the recreation and culture and clothing and footwear sectors while a rise in petrol and diesel prices partially offset the fall.
Martin Beck, UK economist at Capital Economics, said July’s fall was likely to signal the start of a sustained drop.
He said: “Particularly encouraging was that the core rate dropped from 2.3% to 2%. Admittedly base effects supported July’s easing. Inflation in the same month in 2012 was pushed up temporarily by a rebound in clothing inflation and a jump in airfares.”
Other measures of consumer inflation also showed a slow down.
CPIH, the new measure of consumer price inflation which includes the costs owner occupiers face in owning, maintaining and living in their own homes, grew by 2.5% down from 2.7%.
And RPIJ, the improved variant of the Retail Prices Index, grew by 2.6% down from 2.7%.
These latest numbers continue the trend of broadly steady inflation seen since spring 2012.
Taking a longer term view, the three main contributors to the 12-month inflation rate in the last five years have been food and non-alcoholic beverages; housing, water, electricity, gas and other fuels and transport, including motor fuels.
Beck said that other indicators point to further falls in inflation ahead.
He said: “Producer prices figures released today confirmed that price pressures at the very start of the inflation pipeline remain subdued.
“Looking forward although there are growing signs of economic recovery we think the degree of slack in the economy will help push down CPI inflation close to the Monetary Policy Committee’s 2% target by the end of the year.
“The rationale for the forward guidance announced by the MPC last week just got a bit stronger.”
