Inflation drops to lowest level in nearly three years

UK inflation fell to the lowest level in nearly three years in April as energy prices continued to cool, according to official figures. Consumer Prices Index (CPI) inflation slowed to 2.3% in April, down from 3.2% in March, according to the Office for National Statistics (ONS).

It marks the lowest level since July 2021 when inflation was recorded at 2% - the Bank of England's target level.

Grant Fitzner, the ONS's chief economist, said: "There was another large fall in annual inflation led by lower electricity and gas prices, due to the reduction in the Ofgem energy price cap. Tobacco prices also helped pull down the rate, with no duty changes announced in the budget.

"Meanwhile, food price inflation saw further falls over the year. These falls were partially offset by a small uptick in petrol prices."

A Treasury spokesperson said: "We rightly protected millions of jobs during Covid and paid half of people's energy bills after Putin's invasion of Ukraine sent bills skyrocketing - but it wouldn't be fair to leave future generations to pick up the tab. That's why we must stick to the plan to get debt falling. The economy is turning a corner, with strong growth this quarter and inflation close to target, allowing us to cut taxes for the average worker by £900 a year."

But shadow chancellor Rachel Reeves said the latest inflation figures were not the time for ministers to be "taking a victory lap".

In a statement, she said: "Inflation has fallen, but now is not the time for Conservative ministers to be popping champagne corks and taking a victory lap. After 14 years of Conservative chaos families are worse off. Prices in the shops have soared, mortgage bills have risen and taxes are at a 70-year high.

"Rishi Sunak is now putting family finances at risk again with his £46billion unfunded policy to abolish national insurance that will mean higher borrowing, higher taxes or the end of the state pension as we know it. It's time for change. Labour's first steps will deliver economic stability so we can grow our economy and keep taxes, inflation and mortgages as low as possible."

Mr Sunak said: "Today marks a major moment for the economy, with inflation back to normal. This is proof that the plan is working and that the difficult decisions we have taken are paying off. Brighter days are ahead, but only if we stick to the plan to improve economic security and opportunity for everyone."

But the Liberal Democrats said nobody would be feeling better off after the latest figures.

Lib Dem Treasury spokesperson Sarah Olney said: "Nobody will be feeling any better off after today, with families still facing a £9billion mortgage bombshell this year alone. Conservative ministers cannot celebrate today after presiding over the worst cost-of-living crisis in a generation.

"The aftershocks of this crisis will be felt for years to come, and the blame lies squarely with this incompetent Government. The Conservative party should never again be trusted to manage the British economy."

The latest inflation data sets the stage for interest rate cuts in coming months, the Confederation of British Industry (CBI) has said.

Alpesh Paleja, CBI lead economist, said: "A big fall in inflation was always on the cards for April, given Ofgem's 12% cut to the energy price cap. Households and businesses will welcome a more benign inflationary environment, but it's worth noting that many will still be struggling with a high level of prices, particularly in food and energy bills.

"Today's data further sets the stage for interest rate cuts in the coming months. While the Monetary Policy Committee is likely to reduce interest rates over the summer, they are still holding out for more definitive falls in measures of domestic price pressures.
"It's encouraging that pay growth is now a touch below the Bank of England's forecast, but there's still a long way for it to get closer to levels consistent with inflation at target.

"The Bank will also be mindful of growing upside risks to inflation in the near-term: with the growth outlook improving at home, and tensions in the Middle East threatening to stoke commodity prices and supply pressures globally."