Inflation has hit the Bank of England’s target for the first time in almost three years. Prices rose at 2% in the year to May, down from 2.3% the month before, official figures show. The economy is a key talking point in the run-up to the general election on 4 July, with all of the main parties debating how they would keep the cost of living under control. It comes ahead of a Bank of England decision on UK interest rates this Thursday.
The bank is expected to hold the rate at 5.25% – the highest for 16 years – for the seventh meeting in a row, with markets not betting on a cut until August.
The drop in May’s figure was driven by a slowdown in price rises for food and soft drinks, recreation and culture, and furniture and household goods. However, petrol prices went up sharply. Inflation hit 11.1% – its highest level in over 40 years – in October 2022 as energy and food prices surged due to Russia’s invasion of Ukraine.
It sparked a cost of living crisis, leaving millions of households struggling to pay for basics.
Inflation has been steadily falling since then but it does not mean the prices of goods and services overall are coming down, just that they are rising at a slower pace. The Bank of England has also put up interest rates to dampen down consumer demand, driving up mortgage costs for homeowners across the UK in the process.
May’s figures are the last big official economic statistics before the general election campaign and will spark significant debate among the main parties.
The Conservatives will hope the figures can help their story of an economic turnaround. But Labour continue to press concerns about an ongoing cost of living crisis. Food prices are still 25% higher than at the beginning of 2022 and petrol prices are now on the way up again.
Chancellor Jeremy Hunt said May’s figure showed that “the difficult decisions that we’ve taken have paid off”.
“That would not have happened under Labour that refused to condemn the public sector pay strikes, that would have meant inflationary pay rises, inflation lasting longer,” he added. But Rachel Reeves, Labour’s shadow chancellor, said: “Unlike Conservative ministers, I’m not going to claim that everything is all fine, that the cost of living crisis is over, because I know that pressures on family finances are still acute”.
Liberal Democrat Treasury spokeswoman Sarah Olney said: “The hard truth is that millions of people won’t be Rishi Sunak’s boasts will ring hollow to countless families seeing their mortgages skyrocket and agonising rises in shopping prices compared to just a few years ago
Source: BBC
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