Inflation in the UK has hit the Bank of England’s target for the first time since July 2021, marking a significant economic development.
- The annual Consumer Prices Index (CPI) rose by 2% over the 12 months leading up to May 2024, as reported by the Office for National Statistics (ONS).
- A notable factor in this shift is the change in food prices, which increased by 1.7%, down from 2.9% the previous month.
- The Consumer Prices Index including Housing costs (CPIH) also saw a reduction, increasing by 2.8% compared to 3% the previous month.
- Experts suggest this inflationary progress could lead to potential interest rate cuts, affecting millions of mortgage holders.
The United Kingdom has achieved a critical milestone in economic stability as the annual Consumer Prices Index (CPI) inflation rate rose by precisely 2% in the 12 months up to May 2024. This marks the first instance of meeting the Bank of England’s inflation target since July 2021. The data provided by the Office for National Statistics (ONS) attributed this change primarily to fluctuations within the food price sector, which observed a decrease from a 2.9% rise in April 2024 to a more modest 1.7% in May.
Simultaneously, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) displayed a downward trend by climbing to 2.8% over the same period, a decrease from the 3% noted the preceding month. This reduction is reflective of broader economic adjustments and individual sector performances, contributing to the moderation in inflationary pressures within the UK market.
The clothing and footwear sectors also experienced marked changes, with CPI falling by 0.6% month-on-month to reach a 3% increase over the year to May 2024. These figures suggest a complex interplay of market forces and consumer behaviours influencing the overall inflation scenario.
Kris Hamer, director of insight at the British Retail Consortium, commented on the implications of reaching this inflation target, suggesting it could potentially ease pressures on UK consumers. He noted, “UK consumers will breathe a sigh of relief as CPI hits the 2% target for the first time since July 2021, raising hopes of an interest rate cut for the 9.6 million mortgage holders across the UK.” His remarks highlight the significance of this economic event for both consumers and the retail sector.
Furthermore, Hamer emphasised the need for government intervention to sustain this inflationary progress. He urged, “It is vital that inflationary progress is not taken for granted by the next government,” stressing the importance of addressing factors like business rates that indirectly contribute to consumer costs. This call for strategic governance highlights the interconnectedness of policy decisions and economic health.
The alignment of inflation with the Bank of England’s target is a notable achievement that may influence future monetary policies.
