UK inflation eases to BoE's 2% target

(Sharecast News) - Annual consumer price inflation fell to 2% in May from 2.3% in April, in line with expectations, according to figures released on Wednesday by the Office for National Statistics. It marked the first time inflation has hit the Bank of England's target since July 2021 and leaves the door open for a potential rate cut from the Bank this summer. Inflation peaked at 11.1% in October 2022, hitting its highest level since 1981.

Meanwhile, core inflation - which strips out food, energy, alcohol and tobacco - eased to 3.5% from 3.9%, also as expected.

Capital Economics said: "With core inflation (3.5%) and services inflation (5.7%) in May still above that in the euro-zone (2.9% and 4.1% respectively), we doubt the Bank will be ready to follow in the ECB's footsteps and cut interest rates tomorrow.

"For now, we are sticking with our forecast that the Bank will first cut interest rates from 5.25% in August, although that relies on better news on services CPI inflation and wage growth in the coming months."