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CPI falls to 2.8% as petrol and food prices drop

The Office for National Statistics has revealed the annual inflation rate fell in May as consumer price index inflation dropped to 2.8% from 3%, following a fall in petrol prices.

Motor fuels and the food and non-alcoholic beverages sectors exerted the strongest downward pressures on CPI inflation, while the greatest upward pressure came from air and sea transport.

Retail price index inflation dropped to 3.1% from 3.5% in April.

Vicky Redwood, chief UK economist at Capital Economics, says that as the rate falls closer to the Bank of England’s target, further quantitative easing may be on the horizon.

She adds: “The further fall in UK inflation in May is a nice surprise, given that we and the consensus had expected it to hold broadly steady.

“Headline inflation will probably stay around this level in June, but it should then start to fall more quickly and we still think it could be below 2% before the end of the year.”

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