Lower gas and electricity prices were the main driver behind the sharp inflation drop last month as a lower price cap saw costs to households 27% lower in April compared to 12 months before, with gas prices alone down 38%.
Prices rose at 2.3% in the year to April, down from 3.2% the month before, official figures show. This is lowest level in almost 3 years, since it was 2% in July 2021, a time when Boris was in Number 10, Covid restrictions were lifted for the final time and England lost another penalty shootout (vs Italy in the Euro 2020 final).
Despite the 2.3% being slightly higher than predicted (again we all cry!) and above the Bank of England’s 2% target, the hints are suggesting the Bank may cut rates in the summer. Danni Hewson, head of financial analysis at AJ Bell, said the "expectation of a June rate cut has been washed away like confetti after rain-soaked summer wedding" having "plummeted from 50/50 to just over 10%". Someone clearly had their weekend ruined by the weather didn’t they?
Continuing with the weather themed quotes, Rishi Sunak said the figures marked a "major moment for the economy, with inflation back to normal. Brighter days are ahead, but only if we stick to the plan to improve economic security and opportunity for everyone," he added. Rumours are circulating this afternoon (Wednesday 22 May) that this news may be what the PM has been waiting for, with an election on 4 July being speculated.
Turning to a more detailed analysis of the inflation figures, tobacco and food prices (including milk, poultry and fish which had fallen in price in the last 12 months) also contributed to the inflation drop, but mobile phone bills did their usual and got more expensive in April.
Sarah Coles, head of personal finance at Hargreaves Lansdown said for the average household, energy prices were still relatively high. "It’s still a huge increase on the levels we saw before the invasion of Ukraine - when the cheapest deals cost around half this amount - but it’s a real shot in the arm for anyone trying to make ends meet," she added.
Prices for all goods - ranging from food to household appliances - decreased marginally by 0.8% in April compared to this time last year. But services inflation, which measures price rises for things as varied as haircuts and train tickets rose by an average of 5.9%.
All attention now turns to whether the podium is placed outside 10 Downing Street.
