According to the report from the Office for National Statistics (ONS), in May consumer prices rose by 2.0% per year, as expected, after an increase by 2.3% in April. The latest reading was the lowest since July 2021. In addition, inflation returned to its 2% target for the first time in nearly three years. The ONS said that the largest downward contributions to the CPI annual rates came from food, with prices falling this year but rising a year ago, while the largest upward contribution came from motor fuels, with prices rising slightly this year but falling a year ago. The reduction in inflation will be welcomed by both Prime Minister Sunak and the Bank of England, but it probably happened too late to either change Sunak's position in the July elections or push the Bank of England to cut rates at tomorrow's meeting.
Meanwhile, core CPI - which excludes energy, food, alcohol and tobacco - rose by 3.5% per annum (the lowest rate since October 2021) after an increase by 3.9% in April. Consensus estimates also suggested an increase by 3.5% per annum. On a monthly basis, core consumer prices rose by 0.5%, compared with the 0.9% increase in April and the market estimate of a 0.2% increase.
The data also showed that on a monthly basis, the consumer price index increased by 0.3%, as in April. Economists expected a 0.4% increase.