Inflation returns to target

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Inflation has returned to the Bank of England’s 2% target for the first time since July 2021.

Measured by the consumer prices index (CPI), which rose by 2% in the 12 months to May 2024, it is down from 2.3% in the 12 months to April.

The biggest downward contribution to the fall in inflation came from food-price inflation, which dipped to 1.7% in May, the lowest annual rate since October 2021. This was partially offset by higher petrol prices.

The UK has also won the international race to get back to target, being the first among the euro area and US to bring headline inflation back down to 2%. In fact, the UK currently has the lowest headline inflation rate in the G7 bar Italy.

Despite this, the impacts of sustained high inflation over the past three years will remain for some time, with the relative cost of essential goods expected to remain high.

The Resolution Foundation notes that overall prices have risen by 22% since July 2021 (when inflation was last at 2%), while energy prices have risen by 66% and food by 31%.

Core inflation, meanwhile, which takes out volatile factors like energy, food, alcohol and tobacco to

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