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UK inflation drops to 2pc

News Desk
Thursday, Jun 20, 2024

UK inflation fell to the Bank of England’s target for the first time in almost three years, supporting the case for interest-rate reductions later this year, according to Bloomberg.

The Consumer Prices Index rose 2.0 per cent from a year ago in May, down from 2.3 per cent the month before, the Office for National Statistics said Wednesday. It was in line with economist expectations for a reading of 2 per cent.

The figures draw mark a respite from a brutal cost-of-living squeeze, with inflation topping 11 per cent in late 2022 after war in Ukraine and the end of pandemic restrictions sent prices spiraling. It’s unlikely to help Prime Minister Rishi Sunak’s Conservatives, which are heading for defeat in July 4 election, or persuade the BOE to deliver a rate cut immediately.

Soaring prices and last year’s recession too a bite out of the Conservatives’ reputation for managing the economy. The central bank is still on guard for signs inflation will persist and is watching wages and price-setting in the service sector before acting.

Investors and economists expect BOE Governor Andrew Bailey and his colleagues to leave the benchmark rate at a 16-year high of 5.25 per cent on Thursday when the next decision is released. Rate setters have refrained from public remarks during the election campaign, but they previously expressed concern about indicators of underlying inflation.Economists surveyed by Bloomberg expect the BOE to deliver the first of two rate cuts this year in August. Money markets are more hawkish, only fully pricing in a reduction in November.