UK CPI inflation finally hit Sunak’s target of 2% in May.
- Down from 2.3% in April
- This is the first-time inflation has reached 2% target since July 2021
- Core inflation is at 3.5% down from 3.9% which is still relatively high
- Core inflation strips out food prices, which were the largest contribution to the fall in CPI this month
- Unfortunately, services inflation was higher than expected at 5.7%
- This is still a drop from 5.9% in April but most forecasted 5.5%
- The BoE predicted that CPI would rise again later this year, reaching 2.6% in the final quarter
- The BoE held interest rates at 5.25% on Thursday
- They signalled an upcoming reduction soon, some forecasts predicting as early as August.
- “We need to be sure that inflation will stay low” – Andrew Bailey, BoE governor
Reaching the target of 2% inflation is good news for Sunak but the rates being held at 5.25% is certainly a bit of a blow to his campaign.