The UK’s Consumer Prices Index (CPI) inflation rate has hit the Bank of England’s 2% target for the first time since July 2021.
- Inflation adjustments were attributed to a decrease in food prices, despite a rise in the Consumer Prices Index, including housing costs (CPIH).
- The British Retail Consortium expresses optimism for potential interest rate cuts, benefiting millions of mortgage holders.
- Retailers are urged by industry experts to seek governmental assistance in reducing consumer cost pressures.
- Business rates and their impact on prices at the consumer level remain a significant area of concern for the retail sector.
The annual Consumer Prices Index (CPI) inflation rate in the United Kingdom has reached the Bank of England’s targeted 2% for the first time since July 2021, as reported by the Office for National Statistics (ONS). This milestone marks a significant change in the economic landscape, offering a glimpse of stability after a period of economic fluctuation.
A crucial factor contributing to this inflation adjustment is the moderation in food prices, which saw an increase of 1.7% over the 12 months to May 2024, a noticeable decrease from 2.9% in the 12 months leading to April 2024. This adjustment is coupled with the performance of the Consumer Prices Index, including owner occupiers’ housing costs (CPIH), which has seen a rise of 2.8% over the same time frame, down from a 3% increase in the prior month.
In the clothing and footwear sector, the CPI registered a 3% increase over the same 12-month period, reflecting a slight 0.6% month-on-month reduction. This sector-specific decline contributes to a broader picture of economic adjustments where various market segments are experiencing divergent inflation rates.
According to Kris Hamer, Director of Insight at the British Retail Consortium, the alignment of the CPI with the Bank’s target elicits optimism among UK consumers. He notes that achieving the 2% target after nearly three years is likely to alleviate the financial strain on approximately 9.6 million mortgage holders, as it raises prospects of an interest rate cut.
However, Hamer underscores the importance of continuous efforts to maintain this inflationary advancement. He calls upon the next government to actively participate in reducing cost pressures on retailers and consumers. Specifically, addressing the burden of business rates—which often lead to elevated prices at checkout—should be a governmental priority to safeguard both the retail sector and consumer interests.
The UK’s alignment with the 2% CPI inflation target underscores a pivotal moment, highlighting both progress and ongoing economic challenges.
