Inflation has fallen to the Bank of England’s 2% 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, according to official figures.
The fall 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.
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, sparking a cost of living crisis, but has been steadily falling since.
Services price inflation, which looks only at the service-related categories such as hospitality fell 0.2 points to 5.7 per cent, but did not drop as low as the 5.5 per cent expected by economists.
Michael Kill, CEO of NTIA, commented,
‘Hitting the 2% inflation target might seem like a win, but for businesses and consumers on the ground, it’s a different story. This achievement hasn’t yet brought real benefits to those who need it most. While some may celebrate, many in our industry are barely hanging on. The harsh reality is that the struggle continues daily, and we must keep supporting those affected to ensure a true economic recovery that reaches every sector of society.'”
Kate Nicholls, Chief Executive of UKHospitality, said:
“Inflation coming down to 2% and hitting the Bank of England’s target is the strongest signal yet for interest rates to be cut.
“It’s clear that the economy is heading in the right direction, which should give confidence to the Bank that now is the time to begin easing the sustained pressure from high interest rates on businesses and consumers.
“We need to remember that costs remain high for hospitality businesses and beginning to reduce the cost burden for the sector needs to be a priority for any incoming government.”
Chancellor Jeremy Hunt said:
“A year-and-a-half ago, the Bank of England predicted the longest recession in 100 years. Instead, we have had a soft landing with inflation that was higher than nearly any other major economy now lower than nearly all our major competitors. That shows the difficult decisions that we’ve taken.”
