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The UK consumer price inflation rate returned to the Bank of England’s target after nearly three years of loftier readings, numbers on Wednesday showed.
According to the Office for National Statistics, the rate of yearly consumer price growth faded to 2.0% in May, from 2.3% in April. The reading was in-line with the FXStreet cited consensus.
The rate of inflation stood as high as 11.1% in October 2022, but has faded, albeit in a bumpy fashion, since then. The rate of inflation last sat at the target range back in July 2021.
On a monthly basis, consumer prices grew 0.3% in May, as they did in April from March. They had been expected to rise 0.4% last month, however, so the latest reading fell short of the FXStreet cited consensus.
The yearly core inflation rate, which strips out energy, food, alcohol and tobacco, faded to 3.5% last month from 3.9% in April, as expected.
The numbers from the ONS showed annual services inflation, a gauge on which the BoE has been keeping a close eye, cooled to 5.7% from 5.9%.
The data will give the BoE some food for thought, ahead of Threadneedle Street’s interest rate decision at midday on Thursday. No change to bank rate, currently at a 16-year high of 5.25%, is expected. However, the cooler inflation readings could open the door for a summer rate cut.
The central bank’s next decision following Thursday’s is on August 1. Unlike June’s rate call, August’s decision will be accompanied by the latest monetary policy report with economic projections, as well as a press conference with Governor Andrew Bailey.
Separate data showed UK producer prices declined at a slower pace on-year last month than they did in April.
Producer input prices declined 0.1% annually in May, the decline easing from a 1.4% fall in April.
On a monthly basis, producer input prices were flat in May, but topped expectations of a 0.2% fall. Prices had risen 0.8% in April from March.
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