UK inflation falls to 2.3%
Latest reading is a ‘huge step’ in the right direction for personal finances, says ii's Myron Jobson.
22nd May 2024 07:34
by Myron Jobson from interactive investor
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Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The latest inflation reading is a huge step in the right direction for personal finances. It is a psychological milestone that will make many Britons feel good about where prices are heading after having to endure higher costs for necessities for a prolonged period.
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“The sharp fall in the headline inflation figure in April is largely due to a sizeable decline in Ofgem’s energy price cap. Food inflation also eased further last month, providing some more relief to shoppers struggling to deal with higher costs. The easing in household energy and food prices is really important for households, especially for those on a low income who spend a higher-than-average proportion of their income on these essential inflation categories.
“Core inflation, which strips out volatile food and fuel prices to give a sense of the underlying trend, also fell to its lowest level since October 2021. This is a positive sign for the Bank of England, but there is still work to be done.
“It also gives rise to hopes that the UK central bank is on the verge of succeeding in its effort to rein in price increases. While the inflation report is unlikely to change expectations for when the Bank of England will begin to cut interest rates on its own, it could prove to be a significant development that gives policymakers confidence that inflation is returning to normal – one of the prerequisites to cutting the base rate.
“Overall, the latest inflation report offers cause for optimism among Britons, who have been reeling from a double whammy of high inflation and high interest rates. Prices are still rising – but at a slower rate than what we have been accustomed to in recent history. It is important to remember that CPI inflation is an annual measure, meaning it won’t be smooth sailing from here on in. Uneven month-to-month reports are expected even though inflation continues to trend down.
“We all have a personal inflation number that is unique to each individual. That’s because we don’t all buy the same goods and services. As such, your inflation rate might end up being lower, or higher, than the headline figure.”
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