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Friday, June 21, 2024

UK Inflation Drops Sharply to 8.7% Amid Cost of Living Crisis

Britain has experienced the most significant decline in inflation since the onset of the cost of living crisis, as the annual rate dropped to 8.7% in April. However, there was a continuing rise in food prices, reaching the fastest pace in 45 years.

According to the Office for National Statistics (ONS), the consumer prices index showed a drop below double digits for the first time since August, falling from 10.1% in March. Inflation had reached its peak at 11.1% in October.

The sharp decline in inflation can be attributed to the absence of a repeat of last year’s record energy price hikes for households. However, this decrease was offset by a significant increase in the cost of food and non-alcoholic beverages, which rose by 19% in the 12 months leading up to April.

Grant Fitzner, the ONS chief economist, said: “Prices, in general, remain substantially higher than they were this time last year, with annual food price inflation near historic highs.”

Despite the cooling of the headline inflation rate, which City economists had predicted to decline more significantly to 8.2% in April, stubbornly high levels of inflation persist. Economists are warning that Chancellor Rishi Sunak’s target to halve the inflation rate this year may be met with a narrower margin than initially expected.

These figures are likely to strengthen expectations for the Bank of England to continue raising interest rates during its next meeting in June, as part of its aggressive measures to combat inflation, which are considered some of the most assertive in decades. Earlier this month, the central bank had projected that inflation would decrease to 8.4% in April.

According to the latest data from the ONS, the fall in the annual inflation rate was partially attributed to electricity and gas prices, which contributed to a decline of around 1.4 percentage points. This was due to the drop in the Ofgem price cap implemented in April last year.

However, the decline was offset by ongoing increases in food prices, which continue to rise at the fastest annual rate since 1977. Additionally, costs for recreation and culture, alcoholic beverages and tobacco, communication, and transport also contributed to the overall inflation rate.

Rachel Reeves, the shadow chancellor, said: “As bills keep surging, families will be worried food prices and the cost of other essentials are still increasing. They will be asking why this Tory government still refuses to properly tackle this cost of living crisis, and why they won’t bring in a proper windfall tax on the enormous profits of oil and gas giants.”

Jeremy Hunt, the chancellor, said: “The IMF said yesterday we’ve acted decisively to tackle inflation but although it is positive that it is now in single digits, food prices are still rising too fast.”

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