by David Milliken and Suban Abdulla

LONDON (Reuters) – British inflation returned to the Bank of England’s 2% target in May for the first time in almost three years, according to official figures released on Wednesday.

The slowdown in price increases comes as the economic impact of the COVID-19 pandemic and Russia’s invasion of Ukraine has largely faded.

The decline in inflation should be welcomed by Prime Minister Rishi Sunak in the run-up to the July 4 legislative elections and by the Bank of England (BoE) which meets on Thursday.

The publication of this statistic, however, undoubtedly comes too late to reverse voting intentions for an election in which the opposition Labor Party is the winner and for the BoE to decide on a reduction in its rates.

British inflation returned to 2% in May year-on-year, a figure in line with expectations, after slowing to 2.3% in April and a 41-year high of 11.1% in October 2022.

This slowdown is more marked than that recorded in the euro zone or the United States.

However, consumer prices in the UK have risen by around 20% over the past three years, reducing citizens’ living standards and contributing to the unpopularity of Rishi Sunak’s Conservative Party, which is lagging behind by around 20 points over the Labor Party, according to opinion polls.

The BoE, for its part, said a return of inflation to its target was not enough in itself for it to start cutting interest rates.

While most economists polled by Reuters believe the BoE will begin to cut interest rates, which in August 2023 reached their highest level in 16 years of 5.25%, financial markets estimate that a first monetary easing is more likely in September or October. The probability of a rate cut on Thursday is only 10%.

(Reporting David Milliken and Suban Abdulla; Claude Chendjou, edited by Bertrand Boucey)

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