British inflation slowed in May to the central bank’s two percent target, official data showed on Wednesday, boosting Prime Minister Rishi Sunak’s election campaign.
The Consumer Price Index fell as expected from 2.3% in April, the Office for National Statistics said in a statement, citing the easing of food price increases.
That follows almost three years of inflation above Britain’s target, which last stood at 2% in July 2021 before soaring higher amid a cost-of-living crisis.
The news sets the scene for the July 4 general election, which Sunak’s Conservatives are expected to lose badly to Keir Starmer’s main opposition Labor Party, according to opinion polls.
Sunak welcomed the slowdown in inflation, but Labor criticized the Conservatives’ handling of the economy after 14 years in power.
“It’s very good news, because the last few years have been very difficult for everyone,” Sunak told LBC radio.
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“Inflation is back on target and that means people will start to feel the benefits and ease some of the burden on the cost of living, and it’s because of that economic stability that we’ve restored.”
The Bank of England will meet on Thursday, but is expected to cut interest rates, as is customary ahead of the British election.
‘Worse’
After peaking at 11.1% in October 2022, consumer price growth eased following a series of interest rate hikes by the UK central bank.
Britain’s economy, however, stagnated in April after emerging from recession in the first quarter of the year, official figures showed last week.
Prices are still rising beyond the sharp increases seen in recent years, but at a slower pace as businesses and households grapple with the easing of the cost of living.
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“After 14 years of economic chaos under the Conservatives, workers are worse off,” said Labor finance spokeswoman Rachel Reeves.
“Prices are up in stores, mortgage bills are higher and taxes are at a 70-year high,” Reeves said.
“Labour has a plan to make people better off to bring stability to our economy.”
No surprises
The BoE has launched a series of rate hikes in late 2021 to combat inflation, which has risen since countries emerged from Covid lockdowns and accelerated after Moscow’s invasion of Ukraine.
The institution last month kept its key rate at a 16-year high of 5.25%, but hinted at a summer cut as UK inflation eases further.
Adding to the mix, rising interest rates have exacerbated the cost-of-living squeeze because they raise the cost of borrowing, thereby reducing disposable incomes.
“The BoE will be encouraged by a slowdown in headline inflation and while concerns remain about elevated underlying price pressures, further declines in service inflation are expected in the coming months,” said KPMG UK chief economist Yael Selfin.
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“Today’s data is unlikely to trigger a surprise rate cut tomorrow, however, the (bank) could have sufficient data to start the easing cycle in August.”
Influential business lobby the Confederation of British Industry added that the stage was now set for the BoE to cut interest rates in August.
“A further fall in inflation in May will be welcome news for households as we move towards a more favorable inflation environment,” said CBI economist Martin Sartorius.
“However, many will still feel the pinch due to the price level being much higher than in previous years, particularly for food and energy bills.”
Source: AFP