Business

UK inflation falls by less than expected to 2.3%

Decline was driven by easing energy and food costs

City analysts had forecast the annual increase in the cost of goods and services would fall to 2.1 per cent.

Wed May 22 2024 - 07:20

UK inflation fell to 2.3 per cent in April – its lowest level for almost three years – but the decline was smaller than expected, denting hopes of a return to the Bank of England’s 2 per cent target.

The drop in the consumer prices index (CPI), down from 3.2 per cent in March, was driven by easing energy and food costs. The last time it was lower was in July 2021.

However, City analysts had forecast the annual increase in the cost of goods and services would fall to 2.1 per cent. A slower return to the CPI target could push Bank policymakers to delay cutting interest rates.

Inflation was stubbornly high for much of last year, mainly because of a rapid rise in the price of imports.

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The Bank of England is expected to cut rates by 0.25 percentage points from 5.25 per cent at its August meeting, although many analysts believe lower inflation and rising unemployment could persuade policymakers to go earlier by announcing the first cut in the cost of borrowing for four years at a meeting in June.

Prices grew by 2.4 per cent in the 27-member euro zone in April, the same as the previous month.

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