Inflation drops to 2%, down to lowest level in three years

Inflation has dropped to the Bank of England's target of 2%, which is the lowest it has been since 2021.

Data from the Office for National Statistics shows rates for May are down 0.3% from 2.3% in April.

Rates skyrocketed in October 2022 to 11.1%, the highest they had been in decades, following Russia's invasion of Ukraine.

The Resolution Foundation think tank, which specialises in living standards, said the Bank of England's concerns about services inflation could give rate-setters "pause for thought" .

James Smith, research director at the Resolution Foundation, said: "While the UK experienced a higher inflation peak during the cost-of-living crisis, it has now got back to target more quickly than either the US or euro area.

"But the legacy of a long period of very high inflation means there is unlikely to be much of a feelgood factor among families, as they continue to struggle with the higher cost of essentials.

"While headline inflation is back to normal levels, domestically-driven services-price inflation remains elevated.

"This inflation will worry the Bank of England and may give pause for thought when it comes to cutting interest rates."

Experts think interest rate cuts could happen in August.

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