UK inflation fell to 2% in May, according to the Office for National Statistics (ONS), marking the first time it has hit the Bank of England's target in nearly three years. The consumer prices index (CPI) dropped from 2.3% in April, raising expectations of a potential cut in borrowing costs.
Prime Minister Rishi Sunak hailed the figures as 'great news', noting that inflation was now rising more slowly than in Germany, France, and the US. 'When I became prime minister inflation was at 11%. But we took bold action. We stuck to a clear plan and that’s why the economy has now turned a corner,' he said.
However, shadow chancellor Rachel Reeves warned that the cost of living crisis was not over. 'Pressures on family finances are still acute, because, while inflation is down, of course, those higher prices still remain,' she told the BBC. She highlighted rising shop prices, higher mortgage bills, and taxes at a 70-year high.
The TUC general secretary, Paul Nowak, said the fall in inflation masked three years when UK families suffered the highest price rises in the G7. Core inflation, which excludes volatile items such as food and fuel, stood at 3.5%, while services inflation remained elevated at 5.7%.
The Bank of England is expected to keep interest rates at 5.25% when it announces its decision on Thursday. Financial markets now anticipate the first rate cut in September, with a further cut in December. However, the Bank has forecast inflation to rise later this year towards 3% before falling again to 2% next year.
