The latest official figures show that inflation has finally hit the Bank of England’s target for the first time in almost three years. The drop in May’s inflation figure to 2%, down from 2.3% the month before, was due to a slight reduction in prices of food and soft drinks, along with slower rises for recreation, culture, furniture and household goods. However, food prices remain 25% higher than at the start of 2022, and petrol prices are once again on the up.
Inflation, which had peaked at 11.1% in October 2022 due to Russia’s invasion of Ukraine and the resulting price increases in food and fuel, has steadily fallen since. However, despite the current drop, millions of households are still struggling with the cost of living. Although inflation is falling, this does not mean that goods and services overall are becoming cheaper, only that prices are rising at a slower pace. The Bank of England has increased interest rates to try and cut consumer demand, driving up mortgage and rent costs.
May’s inflation figures are the last significant official economic statistics before the upcoming general election on 4 July, causing fierce debate between the main parties over how they would keep the cost of living under control. The Conservatives claim their “difficult decisions” are paying off, while Labour maintain that pressures on family finances are still critical. UK inflation is now growing at its slowest rate since July 2021 and is less than in the eurozone and the US. However, there are still significant concerns about continued high price rises in the services sector.
Gary Wildman, the owner of John Wildman & Sons butchers, confirmed that while prices in his store had levelled out, certain products such as pork remained expensive, while energy bills were higher than a few years ago. This situation resulted in some hit to profit margins, as businesses could not pass all their costs on to customers. The Bank of England is widely expected to maintain current interest rates of 5.25% for the seventh successive meeting, with markets predicting a cut in August rather than July
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