UK May 24 Inflation Hits Bank Target 2% pa

Published / Last Updated on 19/06/2024

The Office for National Statistics (ONS) has this morning released inflation figures for the UK for May 2024.

After April’s huge fall of 0.9% to 2.3% pa, May’s UK Consumer Prices Index again fell 0.3% to 2.0% pa.  This is the Bank of England’s trend growth/target inflation rate.  This is an indication of price rises stabilising.

Prices were driven downward with food and non-alcoholic beverages being negative for May (i.e. prices have fallen), recreation and culture, and furniture and household goods (prices being -1.8% lower than a year ago). Owner/occupier housing costs still increased by a huge 6.7% pa for the year as did alcohol at +7.8%pa and Healthcare +6.3% pa.

This fall overtakes the USA where inflation marginally fell in May to 3.3% pa from 3.4% pa. 

RPI Falls to 3.0% pa

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) and still our preferred measure of real inflation, also fell 0.3%pa from 3.3% pa in April after its dramatic fall on 0.9% pa last month.  RPI has fallen consistently over the last few year and is now nearly 5 times lower than it was in October 2022 (14.2%pa).


This means the Bank of England Monetary Policy Committee (MPC) has more room for manoeuvre on interest rate cuts although the Bank has suggested it will not cut interest rates tomorrow given the General Election on 4th July with no wish to influence our vote despite inflation going in the right direction.

Stock markets may react a little negatively to this today as prices and therefore company profits fall back but the Bond/Gilt market has shot up 1.5% already this morning (at 8.35am).

Key dates for us all:

  • Next ONS inflation report 17 July 2024.
  • Next MPC interest rate decision is tomorrow: 20 June 2024 and after that 1st August 2024.

July’s inflation figures (for June) after the Election will likely present a more difficult decision for the Bank of England but we still believe rates may not be cut until September.  It really depends how low inflation goes next month.

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