INFLATION has finally returned “back to normal” and it is lower than in France, Germany and the US, the Prime Minister has declared.
Rishi Sunak was this morning handed a huge boost as latest official figures showed Consumer Prices Index (CPI) inflation fell to 2 per cent in May, down from 2.3 per cent in April.
GettyPrime Minister Rishi Sunak insisted his plan is working[/caption]
PA:Press AssociationThe data will be watched closely ahead of the Bank of England’s next interest rate decision on Thursday[/caption]
It is the first time inflation has been at the Bank of England‘s target since July 2021, before the cost-of-living crisis pushed prices up – at one stage even hitting levels not seen for four decades.
The PM immediately seized on the opportunity to declare the fall is a sign his economic plan is working.
In a video on X, he said: “Great news this morning inflation is back to normal at 2 per cent.
“That’s lower than Germany, France and America.
“When I became PM inflation was at 11 per cent, but we took bold action, we stuck to a clear plan and that’s why the economy has turned a corner.”
Taking a swipe at Sir Keir Starmer, Mr Sunak added: “Let’s not put all that progress at risk with Labour
“All they would do is spend lots of money, push up inflation and cost every working family 2,000 in high taxes.”
But Shadow Chancellor Rachel Reeves hit back: “After 14 years of economic chaos under the Conservatives, working people are worse off.
“Prices have risen in the shops, mortgage bills are higher and taxes are at a 70-year high.”
The data will be watched closely ahead of the Bank of England’s next interest rate decision on Thursday, but policymakers are widely expected to hold fire on any cuts until after the General Election on July 4.
This is because services inflation is proving to be much more stubborn – reaching 5.7 per cent in May, versus 5.9 per cent in April.
It is one of the factors that has been partly responsible for staying the Bank’s hand in bringing rates down from their 16-year high of 5.25 per cent.
Jake Finney, economist at PwC, warned it is “not ‘job done’ yet”.
He said: “If prices continue to rise at the same month-on-month rate as they did this month (0.3%), then headline inflation will be back over the 2% target next month (at 2.1%).”
Suren Thiru, economics director at Institute of Chartered Accountants in England and Wales (ICAEW), said: “Despite this landmark fall in inflation, concerns over both underlying price pressures and changing policy in the run-up to a General Election means a June interest rate cut is almost certainly off the table.”
Do people actually FEEL better off?
By JACK ELSOM, Chief Political Correspondent
FOR a man who prides himself on economic competence, this is the day Rishi Sunak has been waiting for.
Inflation has finally returned to the Bank of England’s 2 per cent target after a three-year battle to tame price rises.
For ordinary families, it means goods in the shops are getting more expensive less quick – a good thing.
But it also marks a political victory for the PM, who made wrestling down rates his flagship mission upon entering No10.
When he first pledged to halve inflation in January last year, it was running at a crippling 11 per cent.
That task was ticked off earlier this year, and progress to return inflation to a comfortable 2 per cent continued.
Critics will inevitably try to deny Sunak the credit: instead praising the Bank’s tight grip on interest rates or the fading aftershocks of the twin Covid and Ukraine crises.
But the PM can legitimately point to decisions he has taken to help drive down inflation – not least refusing to give in to mammoth pay demands from some unions.
Yet will this really shift the dial in an election campaign where the Tories are languishing around 20 points behind in the polls?
Conservative hands have long clung to the “it’s the economy stupid” strategy – that people will reward governments who make them feel better off.
But there’s the rub: do people actually FEEL better off?
While the cost of things like food, energy and clothes have fallen – they are still a fifth more expensive than they were just three years ago.
So you can forgive people who are still struggling to have looked at today’s stats and just shrugged.