Inflation drops to Bank of England’s 2% target for first time in almost three years

Office for National Statistics, Bank Of England, Rishi Sunak

Inflation has fallen back to the 2% target for the first time in nearly three years (PA) (PA Wire)

Inflation has fallen back to the 2 per cent target for the first time in nearly three years in a boost for prime minister Rishi Sunak’s faltering election campaign.

The Office for National Statistics figures show the Consumer Prices Index (CPI) dropped to 2 per cent in May, down from 2.3 per cent in April.

The new figure marks the first time inflation has been at the Bank of England’s target since July 2021, before the cost-of-living crisis saw inflation shoot up - at one stage hitting levels not seen for 40 years.

The drop is likely to give a pre-election boost to the Conservatives, with Sunak having been quick to declare victory on inflation already last month despite warnings it was expected to fall sharply as rising energy and food costs subside.

Most economists believe the Bank of England will hold interest rates at 5.25 per cent on Thursday, with the election denting hopes of a reduction before the nation head to the polls on July 4.

Investec economist Sandra Horsfield said on Tuesday: “Welcome though a return to target inflation would be, the MPC (Monetary Policy Committee) is unlikely to be fully satisfied should the numbers meet our expectations.

In the (Bank’s) May Monetary Policy Report, the baseline forecast was for a 1.9 per cent inflation rate.”

This is a breaking news story. More to follow...

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