According to the Office for National Statistics (ONS), inflation in the UK has fallen from 2.3% in April 2024 to 2% in May 2024. The figure has fallen within the Bank of England’s 2% target for the first time since 2021, three years ago.
Core inflation, which does not account for the volatile energy, food, alcohol and tobacco industries, also saw a dip in May 2024. Core inflation fell to 3.5% in May from 3.9% in April.
Also Read: US Inflation Falls at 3.3% in May 2024
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The Consumer Price Index (CPI) figures led to a slight increase in the Sterling’s foothold, trading at $1.2721 by 7:33 a.m. London time. The euro, on the other hand, declined by 0.20% against the pound.
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According to the ONS, falling food prices were the single largest contributor to the UK’s inflation figures dipping. Car fuel costs continue to be a point of concern for citizens.
According to Kantar, a UK market research firm, bad weather entailed the slowest increase in grocery sales since 2022.
Will the BOE cut interest rates in the UK as inflation falls?
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According to Ruth Gregory, deputy chief economist at Capital Economics, “For now, we are sticking with our forecast that the bank will first cut interest rates from 5.25% in August, although that relies on better news on services CPI inflation and wage growth in the coming months.”
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The markets have priced a 30% chance of an interest rate cut by August. Before the UK inflation figures were out, the chances of an interest rate cut were at 50%.
According to Jamie Dutta, market analyst at Vantage, “The big question is whether the bank sticks to previous guidance and primes the market for an August kick-off to a rate-cutting cycle.“