The UK’s inflation rate has returned to the Bank of England’s target rate of 2% for the first time in nearly three years, according to official figures released on Wednesday.
This news has been seized upon by the governing Conservative Party as evidence that their economic plan is “working” ahead of the July 4 election.
The Office for National Statistics reported that inflation, measured by the consumer prices index, fell to 2% in the year to May, down from 2.3% the previous month. Food prices made the biggest downward contribution to the decline.
While the Conservative Prime Minister Rishi Sunak has taken credit for the fall, argued it shows the economy had “turned a corner,” opposition leaders have pointed out that working people are still “worse off” due to higher mortgage rates and taxes.
The fall in inflation follows nearly three years of above-target inflation, which peaked at over 11% in late 2021.
The economics director at The Institute of Chartered Accountants in England and Wales, Suren Thiru, said, Despite this, economists do not expect the Bank of England to reduce its main interest rate from 5.25% on Thursday, citing concerns over underlying price pressures and wage increases.
“Despite this landmark fall in inflation, concerns over both underlying price pressures and changing policy in the run-up to a general election means a June interest rate cut is almost certainly off the table,”he said
The Bank of England, like other central banks, raised interest rates aggressively in late 2021 to counter the rapid increase in inflation.
While higher interest rates has helped ease inflation, they had also weighed on the British economy, which had barely grown since the pandemic rebound.
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