UK inflation fell to 2% in May, returning to the official target rate for the first time in nearly three years.
In a boost to the Bank of England’s efforts to bring down the consumer prices index, the Office for National Statistics (ONS) said price pressures eased between April and May.
Lower prices growth will also boost Rishi Sunak after the prime minister made bringing inflation under control one of his main aims. The release of the inflation figures represents the one of the last significant economic indicators before the general election on 4 July.
The fall in inflation was in line with predictions from City economists and it is the first time inflation has hit the Bank’s 2% target since July 2021.
The Bank is expected to keep interest rates at 5.25% when it publishes its decision on Thursday. Rates are expected to remain on hold for much of the year in response to concerns about a halt in a long downward trend in prices growth.
The Bank aims to keep inflation at about 2% but has forecast a rise later in the year back towards 3% before a fall again next year to 2%.
Figures from the ONS showed the rising cost of food and beverages eased along with furniture and the price of household goods.
Analysts said the high level of core inflation, which excludes volatile items such as food and fuel, would be concerning to the central bank.
Core inflation rose by 3.5% in the 12 months to May, down from 3.9% in April. The rising price of services, which eased from 5.9% to 5.7%, was one of the main factors keeping core inflation elevated.
Paula Bejarano Carbo, an economist at the National Institute of Economic and Social Research, said: “Given that today’s data indicates that core inflation remains elevated, this rebound might be sharper than projected. As a result, we expect the MPC to exert caution at its upcoming meeting and hold interest rates, despite today’s encouraging fall in the headline rate.”
In May last year, inflation rose by 8.7%, down from more than 11% in October 2022, the highest rate in more than 40 years.