UK inflation falls to 2.3% as energy prices cool

1. UK inflation has fallen to 2.3% - just above the target of 2% - the lowest level in almost three years
2. It means prices are still rising, just at a slower rate
3. Energy prices are at the heart of the falling inflation rate, as they fell by 27.1% in the year to April
4. "Today marks a major moment for the economy, with inflation back to normal," says Rishi Sunak
5. Inflation was running at 3.2% in the year to March 2024 - that was the lowest rate since September 2021
6. Falling inflation is expected to lead to a cut in interest rates later this year
7. Back in October 2022, inflation peaked at 11.1% - its highest for 40 years

That's all for today

Johanna Chisholm

Live reporter

UK inflation has fallen to 2.3%, which is just shy of the Bank of England's target of 2%. This marks its lowest level in almost three years.

But the figure for the year to April came in higher than expected, which some economists are saying reduces the chances of interest rates being cut when the Bank's policymakers next meet in June.

And of course, it's worth remembering that while inflation has eased - it does not mean that the prices of goods and services overall are coming down, just that they are rising less quickly.

We'll have to wait and see what happens between now and June, but to get caught up with all the latest lines from this morning, you can read more here.

This page was written by Lora Jones, Joe McFadden and edited by myself. Thank you for joining us.

Uncertainty about rate cuts likely to continue

Faisal Islam

Economics editor

The inflation rate is now at more normal levels compared to other countries, markedly below the US and Canada. And it's about the same as Germany and France, while it's higher than Italy.

One of the reasons the government and the Bank of England has suggested the UK has had higher inflation than the rest of the G7 is the structure of the energy price cap.

Here, the cap has passed through big changes in market prices for energy with a time lag.

But over a longer time period, UK prices have risen by 22% over the past three years, compared to 13% for France, or 4% for Japan.

So there are questions about why the UK has been more inflation prone to recent global shocks.

For one, the UK is a bigger user of gas, and so it's more highly exposed to the significant price spike seen. Labour shortages and some changes to post-Brexit trading arrangements may also have contributed.

Where does it go from here? The uncertainty about rate cuts will continue. But there may be more good news on energy from a further cut in the energy price cap - which will be announced on Friday.

What's been happening this morning

Getty Images

We're going to be closing this page soon, but here's a brief recap of what we've been covering this morning:

• Official figures show that UK inflation slowed to 2.3% in the year to April, down from 3.2% in March
• It marks its lowest level in nearly three years, largely driven by energy prices cooling off
• Prime Minister Rishi Sunak says it shows that "brighter days are ahead"
• But services inflation remain stubborn
• Some economists are questioning whether the higher-than-expected number seen for the services sector will reduce the chances of an interest rate cut in June
• Average petrol prices also rose by 3.3p per litre between March and April
• UK house prices climbed in March and private rents eased, although some experts warned renters remain under pressure

‘It will be a while before prices come down’

Aimée Bell

BBC News Northern Ireland

BBC

Let's bring in some more reaction from readers around the UK.

James Small, a co-owner of Shimna Café in Newcastle, tells the BBC that despite inflation falling to 2.3%, he still feels prices are holding “and it will be a while before we see a reduction in anything really”.

The small business owner explains how he's gone through 14 consecutive rises on business loan repayments, which he points out “can all add up".

Despite this, he remains optimistic for the future, even while he continues to struggle with inflation.

“We’ve rode the storm and so far we’ve managed okay," Small says. "I think everything will get better sooner rather than later."

House prices boost but renters under pressure

Elsewhere this morning, the Office for National Statistics has also reported its latest house price figures.

It says that average house prices in the UK went up by 1.8% in the 12 months to March.

The typical house in the UK is now worth £283,000.

House prices are seen as an important indicator on the wider health of the economy, and it marks a recovery after prices fell slightly the month before.

But the latest figures show that renters remain under pressure. Private rents in the UK increased by 8.9% in the year to April.

Although they were slightly down on the month before, some experts say prices remain high because landlords are being squeezed out of the sector due to higher interest rates and changes to legislation.

Labour MP says core inflation still higher than it should be

Some more response from the opposition, this time from Darren Jones, the shadow chief secretary to the treasury.

The Labour MP tells the BBC's Today programme that he welcomes the news that inflation is "coming down" but stresses that the Bank's target rate of 2% is where the country should be.

Echoing the shadow chancellor's remarks from earlier, Jones reiterates Labour's line that "now is not the time for any victory lap from the Conservatives".

"The damage is already done," he says, and "core inflation is still higher than it should be".

BBC

Darren Jones sat down with Laura Kuenssberg last autumn

How much are prices are rising for you?

BBC

It's important to remember just how inflation affects different households in different ways - which is why the BBC has joined up with the Office for National Statistics (ONS) to create a personal inflation calculator.

It shows you what your rate is and what items in your household have gone up the most in the past year.

• Click here for the personal inflation calculator

What's happening with food prices?

EPA-EFE/REX/Shutterstock

As we've been covering a lot of the immediate reactions, you might still be left wondering: what's going on with your weekly shop?

Most of us will have noticed prices rising at the supermarket tills or the corner shop in the last year.

The inflation rate for food and non-alcoholic drinks hit a peak of 19.1% last April, before starting to cool off.

The latest figures today show that between March and April this year, the annual rate of inflation for food products - including items like bread and cereals, meat, dairy products, vegetables and soft drinks - have eased up.

More cloud than silver lining for mortgage hunters

Kevin Peachey

Cost of living correspondent

BBC

Although a falling inflation rate is welcome, there may be more cloud than silver lining for those looking for a mortgage.

Brokers say the inflation rate of 2.3% is slightly worse than was forecast. Markets and lenders may have already priced in a slightly bigger fall.

Now they could think sticky service inflation may delay any cuts in interest rates by the Bank of England until later in the summer.

In turn, that could mean lenders are less likely to reduce their mortgage rates on new fixed deals in the short term.

About 1.6 million households have a current, cheaper fixed deal expiring this year.

As they search for another one, it is likely to be a “bumpy ride”, one brokers says.

Experts wary that rate cut could come in June

We've just rounded up a bit of reaction from economic experts who have been looking at today's figures. Here's what they have to say:

• James Smith, an economist at ING, says services inflation was "the single most important indicator for the Bank of England". But April's figure came in higher than expected, reducing the chances of interest rates being cut when the Bank's policymakers next meet in June.
• Suren Thiru of the Institute of Chartered Accountants in England and Wales describes the drop in inflation as "underwhelming", but says the figures might convince the Bank of England to ease policy, and adds that a summer interest rate cut is still possible
• Yael Selfin, chief economist at KPMG UK, says that although inflation was now within "striking distance" of the Bank's 2% target, it may still not be enough for more cautious members of its rate-setting committee to go for a rate cut in June

‘You can’t pass all the cost onto the customers’

BBC

Let's now check in with some more folks.

Gary Wildman, a butcher who owns John Wildman & Sons, tells the BBC that, though prices are still going up, "they are beginning to level off and come down again".

"Prices are probably 10 to 15% more than they were at the beginning of Covid but they are [levelling off] now definitely," Wildman says.

He says the costs for his company have gone up, but they've held off on passing on all the price rises they've faced to the consumer.

"You can’t pass all the cost onto the customers, otherwise the customers won’t come in," he says.

His business is also facing other challenges, such as finding enough trained staff and spending a big proportion of their takings on energy costs.

Services sector inflation remains stubborn

EPA

Although the April figures showed a record fall in energy costs, inflation in the services sector - which includes things like hairdressing and hospitality - was higher than expected.

It is an important indicator the Bank of England will consider when deciding whether or not to cut interest rates at its next meeting in June.

In April, it came in at 5.9%, which is much higher than the 5.5% the Bank itself had predicted.

Rob Wood, chief UK economist at Pantheon Macroeconomics, has described it as a "shocker", and adds that he now expects the more cautious members of the Bank of England's rate-setting committee will "take some time" over potential rate cuts.

Why energy prices are so important

Kevin Peachey

Cost of living correspondent

There is a reason why energy prices are important - they touch so many elements of our economy.

Nearly every household pays for gas or electricity in some way. Industry is a heavy user of them. Shops, cafes, museums and so on all have a bill to pay.

That's why rises in the cost have hit hard in the last couple of years and falls are now moving things the other way.

Politicians and energy suppliers know full well that it is often global factors that affect the wholesale price of energy, which is usually something beyond their control.

‘It doesn’t seem as ridiculous as it was'

BBC

"It doesn’t seem as ridiculous as it was," Ellie, a teacher and mother of two tells the BBC, but she concedes that "everything does seem quite expensive".

She adds that food prices still feel quite high to her, although she wasn’t the only parent at a play centre in Rustington that thinks price rises are easing.

"I have noticed a raise in the last couple of years, especially in supermarkets and with everything really," another parent says.

"I think in the last couple of months it's levelled out but the last few years it has definitely risen."

Energy remains pricier than before pandemic

Kevin Peachey

Cost of living correspondent

As we’ve been hearing, energy prices are at the heart of the falling inflation rate.

But this doesn’t mean domestic gas and electricity comes cheap.

Yes, it is less expensive than at its peak when the government had to step in with its price guarantee, but it remains pricier for households than before the pandemic.

That’s part of the reason why many people are still finding their budgets are stretched.

The good news is that a further 7% fall in energy prices has been forecast for July.

We get the next quarterly price cap announcement from the watchdog Ofgem on Friday.

Chancellor admits it will take time for pressure to ease

BBC

Some more now from Chancellor Jeremy Hunt.

Speaking on the BBC's Today programme, Hunt has been challenged about whether he - and more broadly, a Conservative government - can be trusted to make people's lives better in the run-up to a general election.

BBC host Emma Barnett begins by reading out a message from a nurse who wrote in to the programme saying her wages have risen little while her food and energy bills have soared.

The chancellor begins by acknowledging that prices are still "a lot higher than they were a year ago", but adds that he believes "it will take time for that pressure to ease on family budgets".

He says that looking to the future, it was a good sign that the International Monetary Fund (IMF) has said the UK is facing a "soft landing" without having to go through a long recession that some experts were predicting.

"But that doesn't mean people at home will be feeling immediately better because we've been through a very difficult period with the pandemic, the energy crisis," he adds.

Interest rate cuts on a knife edge

Faisal Islam

Economics editor

Today's inflation figures do not decisively point to an interest rate cut in June.

While the fall of the headline rate of inflation to 2.3% was welcome, the inflation seen in the services sector remained higher than expectations, with only a marginal fall to 5.9%.

This measure is a better indicator of how persistent or sticky inflation will be in the coming months.

It shows how much the inflationary bug, which started in energy, has now spread to other prices and wages.

April saw high inflation pass on to other sectors of the economy through inflationary rises in mobile and broadband bills.

The impact of the national living wage rises is another important factor. All of which will leave June’s decision on whether to cut on a knife edge.

There are new figures for inflation and wages before that decision. While the direction of travel is now clearly downwards, the Bank cannot yet declare the inflationary fires out.

Lib Dems say no-one will feel better off today

Nobody will be feeling better off today despite the latest figures, the Liberal Democrats say.

Sarah Olney, the Lib Dem Treasury spokesperson, says that families are still facing a £9bn mortgage "bombshell" this year alone in the face of higher interest rates.

"Conservative ministers cannot celebrate today after presiding over the worst cost-of-living crisis in a generation," she says.

"The aftershocks of this crisis will be felt for years to come, and the blame lies squarely with this incompetent government."

'Cost of living crisis not yet over', union boss warns

PA Media

The Trades Union Congress, which represents millions of union members across England and Wales, is warning that the cost of living crisis is not over yet.

"Prices are still going up. Food and energy bills are much higher than a couple of years ago. And many are being hit by soaring mortgage repayments," Paul Nowak says.

While he welcomes the lower rate of inflation he adds that "millions up and down the country are still having to cut back on everyday essentials".

Government borrowing comes in high

Separately, the Office for National Statistics has also released its latest figures on the public finances this morning.

It says that the government borrowed £20.5bn in April, the fourth highest number for that month since records began in 1993.

It stood £1.2bn higher than the Office for Budget Responsibility, the government's finances watchdog, had predicted.

Economists watch borrowing figures closely to see how much fiscal space the government has for measures such as tax cuts.

The Treasury maintains that borrowing had been necessary during the pandemic and in the wake of Russia's invasion of Ukraine.

"We rightly protected millions of jobs during Covid and paid half of people's energy bills after Putin's invasion of Ukraine sent bills skyrocketing - but it wouldn't be fair to leave future generations to pick up the tab," a spokesperson says.

"That's why we must stick to the plan to get debt falling. The economy is turning a corner."