Inflation in the United Kingdom (U.K.) declined to the Bank of England’s 2% annualized target in May, according to data from the Office for National Statistics.
Headline inflation fell from 2.3% in April and was in line with the consensus expectation of economists.
Inflation’s move back down to 2% gives the Bank of England leeway to begin lowering interest rates and comes ahead of national elections in the U.K. that are scheduled for July 4.
Core inflation, which excludes volatile energy, food, alcohol and tobacco prices, declined to 3.5% in May from 3.9% in April.
A drop in food prices was the largest contributor to the May decline. Grocery sales rose 1% in May, marking the 16th consecutive monthly decline.
Politicians who are campaigning for re-election were quick to declare victory over inflation. British Prime Minister Rishi Sunak declared on social media that inflation is “back to normal.”
However, some economists warned that consumer prices could rise in this year’s second half as energy price caps are phased out across the U.K.
Economists and markets widely expect The Bank of England to hold interest rates steady at their current level of 5.25% at the conclusion of its latest policy meeting later this week.
Markets have fully priced in the first interest rate cut from the Bank of England in August of this year.
