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Investing.com - U.K. inflation fell back to the Bank of England’s target for the first time in nearly three years, data showed earlier Wednesday, raising hopes that the central bank will start cutting interest rates in the near future.
The U.K consumer price index rose by 2.0% on an annual basis in the 12 months to May 2024, as expected, down from 2.3% in April - the slowest increase since July 2021.
On a monthly basis, the CPI rose by 0.3% last month, below the 0.4% forecast, and in line with the previous month’s gain.
The largest downward contribution to the monthly change came from food, with prices falling this year but rising a year ago, according to the Office for National Statistics, while the largest upward contribution came from motor fuels, with prices rising slightly this year but falling a year ago.
Core inflation, which excludes volatile food, energy, alcohol and tobacco prices, fell to 3.5% on an annual basis, from 3.9%, also as expected.
This adds to the wider global disinflation story, after benign U.S. data last week, and follows a sustained period of high inflation in the UK, which peaked at 11.1% in October 2022 - the highest level since 1981.
It comes ahead of the Bank of England's latest decision on interest rates on Thursday, although the central bank is still widely expected to stand pat on rates, for now.
The BoE steadily increased interest rates from December 2021, peaking at 5.25%, as part of efforts to bring down inflation to its target of 2%.
