Rishi Sunak declared “we got there” as inflation hit two per cent having peaked at more than 11 per cent as Britain was plunging into a deepening cost-of-living crisis.
In a rare glimmer of good news for the Tories as they face heavy losses at the general election, inflation dropped to the Bank of England’s two per cent target in May, reaching this level for the first time in almost three years.
It was down from 2.3 per cent in April, according to the Office for National Statistics (ONS), in line with City expectations.
The return to the target represents a major symbolic victory for the Bank after a long struggle to contain the inflation spike unleashed by the end of Covid restrictions followed by the energy price surge after Putin’s invasion of Ukraine in February 2022.
Mr Sunak told LBC: “It’s very good news because the last few years have been really tough on everybody. I know that...taking the action wasn’t always easy, but we’ve got there and inflation is back to target.
“It’s because of that economic stability that we’ve restored, which was my priority when I got this job, that we’ve now been able to start cutting people’s taxes and if I win this election, I want to keep doing more of that.”
Shadow chancellor Rachel Reeves welcomed the fall in inflation but stressed that the cost-of-living crisis is not over.
“While inflation is down, of course, those higher prices still remain,” she told BBC radio.
“Whether that’s the cost of the weekly food shop, the cost of the energy bills, or indeed people who are looking to re-mortgage this year or have seen their rents increase.”
Liberal Democrat Treasury spokeswoman Sarah Olney said: “It is sheer desperation from the Conservatives to claim their plan for the economy is working, when they have presided over the worst cost of living crisis in a generation.”
CPI inflation was last at two per cent in July 2021 but rose rapidly after that to peak at a 41-year high of 11.1 per cent in October 2022 before slowly easing.
The Bank was forced to hike interest rates to a 16 year high of 5.25 per cent by August last year, a level they have stayed at ever since.
Hitting the two per cent target is still unlikely to persuade the Bank’s Monetary Policy Committee to vote for a rate cut at its meeting on Thursday.
The City was also unsettled by a smaller than expected fall in services inflation, which only went down from 5.9 per cent to 5.7 per cent.
As a result an August cut in interest rates is seen as slightly less likely than before with the markets now rating the chances at only about 35%.
The long spike in inflation ushered in a cost of prolonged living crisis that has seen living standards tumble and had a devastating impact on Rishi Sunak’s poll ratings.
Analysts Kantar said yesterday that supermarket inflation has fallen back to 2.1 per cent, the lowest since June 2022.
