INFLATION DROPS TO BANK OF ENGLAND’S 2% TARGET – The bank is expected to hold Interest Rates at 5.25%
Inflation returned to its 2% target in May for the first time in nearly three years, data showed on Wednesday (June 19), but underlying price pressures remained strong, meaning the Bank of England is likely to wait longer before cutting interest rates.
Shadow Chancellor of the Exchequer and Labour MP Rachel Reeves welcomed that inflation has returned to target but said families continue to “struggle with their bills” and the cost of living crisis is far from over.
British finance minister Jeremy Hunt said the lower target would never have happened under a Labour government and that “difficult decisions” taken by the ruling Conservatives over the past few years, including condemning public sector pay strikes, have “paid off”.
Inflation first began to pick up in most Western economies in the second half of 2021 due to bottlenecks from the COVID-19 pandemic, then surged after Russia’s full-scale invasion of Ukraine in February 2022 caused natural gas prices to soar.
Consumer prices in Britain are up around 20% over the past three years, squeezing living standards and contributing to the unpopularity of Prime Minister Rishi Sunak’s Conservatives, who are around 20 points behind the opposition Labour Party in opinion polls.