EconomyMay 24 2023

Inflation falls to 8.7% in April

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Inflation falls to 8.7% in April
(Pexals/Pixabay)

Inflation slowed in April to 8.7 per cent, but experts say many people remain “trapped in a cycle of financial crisis” as a result of the higher cost-of-living. 

The figures from the Office for National Statistics, published today (May 24), showed that inflation fell in April from 10.1 per cent in March. 

This easing of inflation was mainly a result of lower gas and electricity prices in April. 

However, this was offset partially by rising prices in recreation and culture, alcoholic beverages and tobacco, communication, and transport.

On a monthly basis, the pace of price increases slowed, with the consumer price index rising by 1.2 per cent in April 2023, compared with a rise of 2.5 per cent in April 2022.

Inflation remains below October’s peak of 11.1 per cent when price growth hit a 40-year high. 

According to the ONS, food and non-alcoholic beverage prices continued to rise in April and contributed to high annual inflation, but the annual inflation rate of both eased marginally from 19.2 per cent in the year to March 2023, to 19.1 per cent in the year to April 2023.

In his annual report to the Treasury committee earlier this month (May 24), governor of the Bank of England Andrew Bailey acknowledged that the March inflation figure was 0.8 percentage points higher than expected but he added that there is “good reasons to expect inflation to fall sharply over the coming months”.

In March, the price of food and non-alcoholic beverages hit a 45-year high, with prices up 19.2 per cent in the year.

“So while we expect CPI inflation to fall quite sharply as energy costs begin to ease, albeit at a somewhat slower pace than projected in February given the near-term outlook for food prices, the outlook for inflation further out is more uncertain and depends on the extent of persistence in wage and price setting,” Bailey said.

Earlier this month, the Bank of England raised interest rates to their highest level since 2008, with the base rate now sitting at 4.5 per cent

Finance experts have said although the rate of inflation is slowing, people are still struggling with the current cost-of-living challenges. 

Royal London’s consumer finance specialist, Sarah Pennells said: “While headline inflation has fallen, prices are still rising faster than wages and many remain trapped in a cycle of financial crisis. 

“Food inflation remains stubbornly high and 12 increases in the Bank of England’s base rate have ratcheted up borrowing costs for millions of homeowners.”

“While families are making cutbacks across their everyday spending in an attempt to make their money stretch, many are still overdrawn or have to borrow before the end of the month,” she added. 

Commenting on today’s figures, chancellor of the exchequer Jeremy Hunt said although it is positive that inflation is now in single digits, food prices are still rising too fast. 

He added: “We must stick resolutely to the plan to get inflation down.”

jane.matthews@ft.com