Cost of living

Inflation falls to 2.3%, but disappoints markets

Money cash
Money will go further after the fall in price growth (pic: Terry Murden)

Inflation has fallen to 2.3% in the year to April, official figures have revealed, marking a sharp fall from 3.2% in March.

The rate stood at 4% at the start of the year and 11% in October 2022. The Bank of England has said it expects inflation will reach 2% “in the coming months” but predicts it will be 2.5% by the end of the year.

The latest fall was led by lower electricity and gas prices, following the reduction in the energy price cap. Tobacco prices also helped pull down the rate, with no duty changes announced in the Budget. Food price inflation saw further falls over the year.

These falls were partially offset by a small uptick in petrol prices.

Traders were disappointed that the fall was not as steep as some expected, and the FTSE 100 closed 46.12 points (0.55%) lower at 8,370.33.

Russ Mould, investment director at AJ Bell, said: “A slower than expected drop in the rate of UK inflation has spooked the market, pushing back the likely point at which the Bank of England will cut interest rates. Naturally, that led to a sudden jump in sterling and gilt yields and pulled down the FTSE 100.”

A Treasury spokesman said: “We rightly protected millions of jobs during Covid and paid half of people’s energy bills after Putin’s invasion of Ukraine sent bills skyrocketing – but it wouldn’t be fair to leave future generations to pick up the tab. 

“That’s why we must stick to the plan to get debt falling. The economy is turning a corner, with strong growth this quarter and inflation close to target, allowing us to cut taxes for the average worker by £900 a year.” 

Rachel Reeves, Labour’s Shadow Chancellor, said: “Inflation has fallen, but now is not the time for Conservative ministers to be popping champagne corks and taking a victory lap. 

“After 14 years of Conservative chaos families are worse off. Prices in the shops have soared, mortgage bills have risen and taxes are at a seventy year high.

“Rishi Sunak is now putting family finances at risk again with his £46 billion unfunded policy to abolish national insurance that will mean higher borrowing, higher taxes or the end of the state pension as we know it.”

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