This morning’s surprise update from the Office for National Statistics shows headline inflation at 9.9 per cent on the year to August, down slightly from 10.1 per cent in July. While consumer inflation remains at a 40-year high, the drop from double digits back into single digits has the optimists whispering: might inflation have peaked?

This update is no doubt good news, but this is likely to be a brief moment of calm in an ongoing storm. The slight fall in headline inflation has primarily been driven by easing fuel prices, as the cost of oil has been on a downwards trajectory. That at least is an early sign that global markets are starting to fill in the gaps created by the West’s decision to shun Russia’s crude oil supplies. But energy pressures are all but certain to worsen in the coming months when demand spikes; the real test of Europe’s efforts to find alternative sources of energy will be in the colder months and even in the best-case scenarios everyone is expecting an expensive winter.

While the UK government has ‘capped’ what firms are allowed to charge for the unit price of energy this winter, bills will still rise substantially this October. The new government-set price cap will see average household energy bills rise to £2,500, which will be reflected in the inflation data in the coming months.

Meanwhile falling fuel prices are being offset in the UK by rising prices for food and domestic services. Core inflation – which excludes energy and food costs – rose from 6.2 per cent on the year in July to 6.3 per cent in August. The CPI all services index rose too: from 5.7 per cent on the year in July to 5.9 per cent in August — a reminder that the UK’s historically low unemployment rate and record-high vacancies may be putting off ‘stagflation’, but they are causing plenty of problems too. The UK’s painfully tight labour market is causing the costs of domestic services to rise sharply, piling on top of the other price increases for businesses (energy, food) that are also being passed on to consumers.

The UK is likely to experience the inflation yo-yoing that has plagued the United States for months (yesterday’s inflation update shocked the consensus when the headline rate rose by 0.1 per cent) making it increasingly difficult to predict when and at what level inflation peaks. Capital Economics has already come out this morning with its forecast that inflation has ‘not yet peaked’ and probably won’t do so until the end of the year. The silver lining, however, is that the radical, high-end predictions now seem less likely to come to fruition. These predictions were already curbed somewhat last week when the government announced the energy bill price freeze, which is expected to knock several percentage points off where inflation peaks. But don’t get cosy in the single digits: it remains likely that inflation will creep up into the double digits again, and fairly soon.