UK inflation slows to near 3-year low

Consumer Prices Index slowed to 2.3 per cent in April, the lowest level since July 2021, when inflation had stood at 2.0 per cent

• Shajil Kumar
• 22 May, 2024

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By: Shajil Kumar

BRITAIN’S annual inflation rate dropped to a near three-year low in April as energy prices cooled further, official data showed Wednesday, easing a cost-of-living crunch and stoking rate cut expectations.

The Consumer Prices Index slowed to 2.3 per cent from 3.2 per cent in March, the Office for National Statistics revealed in a statement.

That marked the lowest level since July 2021, when inflation had stood at 2.0 per cent – which is also the target for the Bank of England (BoE).

The news comes after the BoE this month signalled a summer interest rate cut, after holding borrowing costs at a 16-year peak of 5.25 per cent to further dampen price rises.

Inflation slowed rapidly last month after energy regulator Ofgem lowered the price cap on energy bills for most UK households to the lowest level for more than two years.

But services inflation – a key gauge of domestically generated price pressure for the BoE – was much higher than expected, while petrol prices also rose.

Services inflation inched down to 5.9 per cent from 6.0 per cent in March. The BoE’s forecasts and the Reuters poll had pointed to a reading of 5.5 per cent.

“There was another large fall in annual inflation led by lower electricity and gas prices, due to the reduction in the Ofgem energy price cap,” said ONS chief economist Grant Fitzner.

“Tobacco prices also helped pull down the rate, with no duty changes announced in the budget.

“Meanwhile, food price inflation saw further falls over the year. These falls were partially offset by a small uptick in petrol prices.”

Gas and electricity bills sank in April on lower wholesale energy prices, which had surged in the wake of key producer Russia’s invasion of Ukraine.

Prime Minister Rishi Sunak, who is struggling to woo voters back to his Conservative Party ahead of national elections expected later this year, has sought to take credit for the fall in inflation.

“Today marks a major moment for the economy, with inflation back to normal,” he said in a statement.

Wednesday’s data means Britain has a lower rate of inflation than the United States, Canada, France and Germany. Japan is yet to report April inflation data. Italy’s inflation rate is 0.9 per cent.

Still, Britain ranks poorly among Western European countries for its inflation record since 2020, with consumer prices up by more than 22 per cent over that time frame – with only the Netherlands, Austria and Germany faring as badly. (Agencies)