THE UK’s rate of inflation fell to 8.7% in April, the latest official figures show.
It is the first time the rate has dropped below 10% since August last year.
The UK’s rate of inflation fell from 10.1% in March to 8.7% in April
It is also the second consecutive month the inflation rate has fallen, after dropping to 10.1% in March following an unexpected rise.
The fall was driven by dips in energy and fuels prices.
But the inflation rate was higher than forecast by economists, who had pencilled in a drop to 8.2% in April.
Inflation is a measure of how the price of goods and services have changed over the past year.
It has eased slightly since the eye-watering 11.1% seen in October.
This is driven by soaring gas and electricity prices, which have now started to fall.
Last April, the energy price cap soared by 54% to £1,971, but this year the Energy Price Guarantee (EPG) has been kept at £2,500 since last October.
Ofgem is set to confirm tomorrow (Thursday, May 25) that energy prices will fall sharply for households in July, when the current EPG comes to an end.
ONS chief economist Grant Fitzner said: “The rate of inflation fell notably as the large energy price rises seen last year were not repeated this April, but was offset partially by increases in the cost of second-hand cars and cigarettes.
“However, prices in general remain substantially higher than they were this time last year, with annual food price inflation near historic highs.”
The slowdown is good news for stretched households, and most experts believe inflation has now peaked.
But price are still rising at a near record pace.
Food and non-alcoholic beverage prices saw an annual rise of 19.1% in April, down only slightly on March’s eye-watering of 19.2%.
It is the second highest seen for over 45 years, when the rate in August 1977 was estimated to be 21.9%.
Chancellor Jeremy Hunt 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.”
What does it mean for my money?
Falling inflation indicates that the cost of goods and services are still rising but at a slower rate.
But prices are still higher than they were.
Alastair Douglas, chief executive of TotallyMoney said: “The cost of living is still on the rise, as is the cost of borrowing.
“The result? More people are missing bills, more people can’t keep up with credit commitments, and 50% of adults are feeling more anxious or stressed as a result of inflation.”
He added that even if the Bank of England hits its 2% inflation target in 2024, it is likely households will still feel the impact for “years to come”.
Food and drink prices rose by record levels in the year to March, putting further strain on household budgets.
Alice Haine, personal finance analyst at Bestinvest, said: “Softening inflation, is better news for budgets relentlessly battered by the cost of living crisis over the past 18 months.
“But consumers would be wise to remember that while inflation is falling, prices are still up by 8.7% compared to a year ago with the only consolation that the pace of those prices rises is slowing compared to previous months. “
Experts believe the slowdown in the rate of inflation is unlikely to stop the Bank of England from hiking interest rates once more at its meeting in June.
Earlier this month, the central banked hiked interest rates to 4.5% – heir highest level in 15 years.
The move will make the cost of borrowing, including loans, credit cards and mortgage repayments more expensive.
Alice added: “With the potential that interest rates could peak at 5% this year, this will only deliver more pain to those taking out a new mortgage or on variable rates, who are still struggling to absorb the 12 consecutive rate hikes since December 2021. “
Although it’s good news for savers as they may get better rates on their nest egg.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]