Consumer Prices Index (CPI) drops to 2%

This week, the Office for National Statistics (ONS) reported that the Consumer Prices Index (CPI) dropped to 2% in May, down from 2.3% in April. This marked the first time inflation has hit the Bank of England’s target since July 2021, prior to the cost-of-living crisis which saw inflation surge to levels not seen in 40 years.

The Confederation of British Industry (CBI) indicated that the current conditions might prompt the Bank to cautiously reduce interest rates in August.

CBI principal economist Martin Sartorius stated on Wednesday, “Today’s data sets the stage for the Monetary Policy Committee to cut interest rates in August, in line with our latest forecast’s expectations.”

The ONS reported:

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 2.8% in the 12 months to May 2024, down from 3.0% in the 12 months to April.

On a monthly basis, CPIH rose by 0.4% in May 2024, compared with a rise of 0.6% in May 2023.

The Consumer Prices Index (CPI) rose by 2.0% in the 12 months to May 2024, down from 2.3% in the 12 months to April.

On a monthly basis, CPI rose by 0.3% in May 2024, compared with a rise of 0.7% in May 2023.

The largest downward contribution to the monthly change in both CPIH and CPI annual rates came from food, with prices falling this year but rising a year ago; the largest upward contribution came from motor fuels, with prices rising slightly this year but falling a year ago.

Core CPIH (excluding energy, food, alcohol and tobacco) rose by 4.2% in the 12 months to May 2024, down from 4.4% in April; the CPIH goods annual rate fell from negative 0.8% to negative 1.3%, while the CPIH services annual rate eased slightly from 6.0% to 5.9%.

Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.5% in the 12 months to May 2024, down from 3.9% in April; the CPI goods annual rate fell from negative 0.8% to negative 1.3%, while the CPI services annual rate eased from 5.9% to 5.7%.

Source: ONS