The UK inflation rate has slowed to 2.3 per cent on the year to April, down from 3.2 per cent in March. This marks the lowest headline inflation rate in almost three years, before the unwinding of lockdowns and release of pent-up demand sent prices spiralling. The Spectator‘s Data Hub outlines the inflation saga below:

April’s slowdown is largely thanks to Ofgem’s reduction to the energy price cap, as higher energy costs fell out of the data. The lower cap saw bills reduce by around 12 per cent: a reduction of £238 from the average household’s yearly bill. According to the Office for National Statistics, the ‘prices of electricity, gas and other fuels fell by 27.1 per cent in the year to April 2024, the largest fall on record, with figures available back to 1989.’

The Chancellor’s decision not to raise tobacco duty in his March Budget also contributed to a slowdown in price rises, as did the cost of food and non-alcoholic drinks: prices rose by 2.9 per cent on the year to April, easing for the 13th consecutive month as price hikes slowed from their peak of 19.2 per cent in March last year. But it wasn’t just energy, food and tobacco costs that slowed: core inflation, which excludes these more volatile costs, fell too – from 4.2 per cent on the year to March to 3.9 per cent in April.

The near-return to the Bank of England’s target of 2 per cent is close enough that ministers are declaring victory. Rishi Sunak has declared inflation ‘back to normal’ and, similar to his comments that the economy has ‘turned a corner’, the Prime Minister insisted this morning that ‘brighter days are ahead.’ Meanwhile Chancellor Jeremy Hunt took a slightly more reserved tone, noting on BBC Radio 4’s Today programme that prices are still  ‘a lot higher than they were a year ago’ – a nod to the fact that a slowdown in the inflation rate means prices keep rising, but at a much more manageable pace.

The trouble is, while this morning’s inflation update is a positive development, the Bank of England may not see it that way. Although inflation slowed significantly, the fall was still smaller than expected, with both the BoE’s expectation and market consensus sitting at 2.1 per cent. Given Threadneedle’s Street’s more hawkish attitude these days – especially regarding returning inflation to target in the medium term (the Bank expects the rate to rise back to where it sits now by the end of the year) – today’s news may not be as encouraging to the Monetary Policy Committee as it is to politicians.

That doesn’t mean a summer interest rate cut is off the cards: indeed, on Monday the Bank’s deputy governor all-but-confirmed speculation that a rate cut is on the way. But there are three chances for the Bank to start its rate-cutting process over the summer: June, August, or even September, at a push. Today’s news further throws up in the air whether the MPC will opt for a cut at its next meeting, or wait until later in the summer to start the process.

Still, ministers are lucky that today’s inflation update – which has the spotlight – overlaps with this month’s public finances update, which is by no means a feel-good story. In short, the government can’t stop spending. Public sector borrowing stood at £20.5 billion last month: £1.5 billion more than in April last year and £1.2 billion than had been estimated by the Office for Budget Responsibility in the March Budget. As a result, the ONS has increased its forecast for borrowing for the 2023-24 financial year by £0.8 billion.

Debt servicing payments continue to weigh down the Treasury, as costs hit £8.6 billion in April, ‘the highest monthly payable for ten months’. Again this was higher than expected by the OBR, and raises further questions about any scope the Chancellor might have for another tax cut ahead of the election, when the cash Hunt has to spend must be funnelled into paying for what’s already been borrowed and spent.

These spending updates help to highlight the catastrophic consequences of the inflation crisis – which today seems, finally, to be under control. But while the crisis may be ending, the damage it created has not all been repaired.