UK inflation falls to 2.3%, lowest level in nearly 3 years but still above Bank of England’s target

London, May 22 (BNA): Inflation in the U.K. fell sharply to its lowest level in nearly three years in April on the back of big declines in domestic bills, official figures showed Wednesday.

The Office for National Statistics said inflation, as measured by the consumer prices index, fell to 2.3% in the year to April, down from 3.2% in March, the Associated Press (AP) reported. 

That is the lowest level since July 2021 when the global economy was still being held back by the coronavirus pandemic. The fall also takes inflation nearer to the Bank of England’s target rate of 2% and is likely to pile pressure on its nine-member rate-setting panel to cut interest rates from the current 16-year high of 5.25%.

The next rate meeting is on June 20 and many economists think the bank will cut borrowing costs. However, others think that ongoing concerns on the panel over the scale of price rises in the crucial services sector and the pace of wage increases, which raise the risks of an inflation rebound if interest rates are cut too soon, make an August reduction more likely.

Though the latest fall in inflation is welcome, it didn’t drop as far as some economists had hoped. It also doesn’t mean the cost of living crisis — the worst in around 40 years — is over. Lower inflation, after all, just shows that prices are rising more slowly than they were before.

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