19 June 2024
Inflation has fallen to the Bank of England’s target of 2% for the first time in nearly three years, as reported by the Office for National Statistics.
This milestone, achieved in May with a drop from 2.3% in April, marks a return to stability not seen since July 2021, before the cost-of-living crisis.
The decline in the Consumer Prices Index (CPI) to the 2% target is a promising sign for the UK economy and comes at a crucial time for Prime Minister Rishi Sunak’s election campaign. Despite this positive news, services price inflation remains slightly higher than expected at 5.7%, causing some concern among economists.
With inflation now at a manageable level, the Bank of England faces increasing calls to cut interest rates to boost consumer demand and support economic growth. The Confederation of British Industry (CBI) has stated that the conditions are now favorable for a cautious reduction in interest rates by August.
Economists note that while the current interest rate of 5.25% has been instrumental in curbing inflation, a timely reduction could further solidify economic stability and enhance consumer confidence.
The bank of England announced today that interest rates would remain at 5.25%, leaving them unchanged for the fifth time in a row. It means the cost of borrowing remains at its highest for 16 years.
Andrew Goodacre, CEO of Bira said: "Delighted to see inflation is now on target and we see no reason for interest not to be reduced."
"We are really disappointed as a rate cut would boost the economy and consumer confidence. For an independent body, this seems like a political decision prior to the election."
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