UK inflation falls to its lowest level in three years

Inflation has fallen to its lowest level in the UK for three years according to official figures.

The rate of inflation fell from 3.2 per cent in March to 2.3 per cent.

According to the Office for National Statistics, falling gas and electricity prices were a big part of the reason behind the sharp fall.

Inflation peaked at 11.1 per cent in October 2022, its highest for 40 years – the government pledged to halve the rate in 2023.

According to the latest data, the cost of electricity, gas and other fuels fell by 27.1 per cent in the year to April.

Rishi Sunak welcomed the news. The Prime Minister said:  “Today marks a major moment for the economy, with inflation back to normal.

“This is proof that the plan is working and that the difficult decisions we have taken are paying off.

“Brighter days are ahead, but only if we stick to the plan to improve economic security and opportunity for everyone.”

Adam Thrower, Head of Savings at Shawbrook said: “Inflation dips closer to the Bank of England’s two per cent target, putting potential interest rate cuts on the horizon. While this might sound positive, these cuts could mean lower returns for savers who haven’t secured fixed rates.

“The silver lining? Longer-term fixed-rate savings accounts are gaining traction. These accounts offer the chance to lock in higher, guaranteed returns for a set period, especially valuable for those saving for long-term goals like retirement. Our research shows 41 per cent of people over 55 plan to use their savings for retirement, and these accounts could be a game-changer for those looking for potentially inflation-beating returns.”

Mark Taheny, managing director at corporate finance advisor Centrus, added:  “The recent trajectory has been gradual but consistent, inching closer to the coveted two per cent target at 2.3 per cent.

“Despite declines in energy, food, and core goods prices over the past six months, quarter of 2024 has witnessed sustained strength in wage growth. This phenomenon can fuel services inflation, potentially leading to the familiar narrative of resilient yet stagnant services inflation.

“Echoing the findings from the March CPI reading, the latest CPI figure could postpone or negate the possibility of an interest rate reduction this summer. This scenario would dissuade market timers and instead prompt investors to secure rates, mitigating potential future volatility.”