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UK inflation at lowest level in 3 yrs

By Jonathan Powell in London | China Daily Global | Updated: 2024-05-23 02:55

Prices of food are displayed at the Borough Market as the UK inflation rates fall by less than expected in London, Britain on May 22. [Photo/Agencies]

Inflation in the United Kingdom dropped from 3.2 percent in March to 2.3 percent in April, reaching its lowest level in almost three years, slightly above the 2 percent target.

The inflation rate decline announced on Wednesday was smaller than expected as economists had predicted it would fall to 2.1 percent in April.

Soaring energy costs in recent years have been a key factor in the high cost of living in the UK and across Europe, placing financial strain on households and businesses alike.

Data from the Office for National Statistics, or ONS, showed the drop in inflation was driven by lower gas and electricity prices, marked by a new lower price cap, which fixes the maximum price that can be charged for each unit of energy.

Decreases in tobacco and food prices helped lower inflation, while increases in mobile phone bills and rents persisted, the ONS stated.

Services inflation, which focuses on categories such as hospitality, culture, and education, decreased less than anticipated by economists, dropping marginally from 6 percent to 5.9 percent, falling short of the predicted 5.4 percent.

British Prime Minister Rishi Sunak hailed the fall in the inflation rate, which had reached its peak of 11.1 percent when he came to power in October 2022.

"Today marks a major moment for the economy, with inflation back to normal," he stated in response to the figures.

"This is proof that the plan is working and that the difficult

decisions we have taken are paying off.

"Brighter days are ahead, but only if we stick to the plan to improve economic security and opportunity for everyone," he said.

Economists said the inflation decrease doesn't guarantee an automatic interest rate reduction by the Bank of England's Monetary Policy Committee from its 16-year high of 5.25 percent at its next meeting on June 20.

Rob Wood, chief UK economist at research consultancy Pantheon Macroeconomics, told the BBC that an August interest rate cut "looks much more likely than a June reduction after services inflation shockingly barely fell in April".

Analysis from the BBC said the inflation rate is now at more normal levels compared to other countries. It is below that of the United States and Canada, and about the same as Germany and France, while higher than Italy.

In response to the figures, the UK opposition Labour Party's shadow finance minister Rachel Reeves said: "Inflation has fallen but now is not the time for Conservative ministers to be popping champagne corks and taking a victory lap.

"After 14 years of Conservative chaos, families are worse off. Prices in the shops have soared, mortgage bills have risen and taxes are at a 70-year high."

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