UK inflation falls to Bank of England’s 2% target for the first time in almost three years | Business News

UK inflation has eased to 2% – raising the prospect of a reduction in interest rates this summer.

O consumer price index (CPI) The rate for the year to May was confirmed by the Office for National Statistics (ONS) on Wednesday.

The number indicates that prices continue to rise, but at the slowest pace since July 2021.

The ONS also reported that core inflation, which excludes volatile elements such as food and energy, fell to 3.5% in May, in line with expectations.

This situation arises following a sustained period of high inflation in the United Kingdom, which reached a peak of 11.1% in October 2022 – the highest level since 1981.

The fall in inflation comes before the bank of englandthe latest interest rate decision on Thursday.

The Bank has been increasing rates steadily since December 2021, as part of efforts to reduce inflation – which has soared following the Covid pandemic and in the midst of war in Ukraine – to your 2% target.

Most analysts expect rates to be maintained at 5.25% for the seventh time in a row this week, amid concerns that inflation could rise again during the second half of the year.

However, current inflation figures make it more likely that a cut will be made in August, commentators say.

Inflation decreased to 2.3% in Aprilalthough the fall was not as large as economists and the Bank of England predicted.

Prospects for a rate cut this week took a hit last month when wage growth – a driver of inflation – Came above expected.

Today’s inflation numbers and Thursday’s interest rate decision will likely be the last major economic announcements to be made before the general elections next month.

‘Scenario prepared’ for rate cut in August

The Confederation of British Industry’s chief economist, Martin Sartorius, said falling inflation would be “good news for families”, although he said many were still feeling the pinch.

He added: “Today’s data sets the stage for [Bank’s] The Monetary Policy Committee will reduce interest rates in August, in line with the expectations of our latest forecasts.

“However, rate-setters will still have to weigh the fall in global inflation against signs that domestic price pressures, such as high wage growth, are proving slower to abate.

“This means they are likely to proceed cautiously beyond August to avoid putting further upward pressure on inflation, especially as growth prospects improve domestically and geopolitical tensions continue to rise.”

JoinUK Secretary General Sharon Graham called on the Bank to cut rates sooner.

She said: “Falling inflation does not mean falling prices. The worst cost of living crisis in generations it still drags on.

“We need action from the Bank of England on Thursday to start reducing interest rates and ease the pressure on struggling homeowners.”

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