Fall in inflation reassuring but cost pressures persist - Chamber

Inflation has fallen to the Bank of England’s 2 per cent target for the first time in almost three years, according to figures released today.

But business leaders warned the next government will still inherit a challenging fiscal landscape and must put easing cost pressures for businesses firmly at the top of its agenda.

Prices rose at 2 per cent in the year to May, down from 2.3 per cent the month before, official figures show.

The easing in the inflation rate was driven by a slowdown in price rises for food and soft drinks, recreation and culture, and furniture and household goods.

Inflation hit a 40-year high 11.1 per cent in October 2022 as energy and food prices surged due to Russia's invasion of Ukraine.

The fall to 2 per cent comes ahead of a Bank of England decision on UK interest rates this Thursday.

The bank is expected to hold the rate at 5.25 per cent for seventh meeting in a row.

Raj Kandola (pictured), director of external affairs at Greater Birmingham Chambers of Commerce, said: “It’s reassuring to see the headline rate of inflation fall to the Bank of England’s target rate for the first time in almost three years.

“Nevertheless, service inflation remains a sticking point, coupled with strong wage growth - all of which makes an imminent interest rate cut unlikely, especially in the midst of a General Election campaign.

“Early analysis from our latest Quarterly Business Report survey underlines the persistent cost pressures local firms continue to face.

“Whichever party forms the next Government will inherit a challenging fiscal landscape, so reducing cost pressures for businesses and unlocking firm-led investment will need to figure highly in growth plans moving forward.”