The rate is a sharp drop from the 3.2% recorded in the year to March, and means it’s at its lowest level since July 2021.
However, it’s slightly higher than the market consensus of 2.1%, but is now within touching distance of the Bank of England’s 2% inflation target.
The biggest downward contributor came from a record fall in gas and electricity prices, with the Office for National Statistics noting these fell by 27.1% in the year to April 2024. Gas fell by 37.5% and electricity by 21%, compared to a fall of 26.5% and 13% up to March.
Indeed, regulator Ofgem’s energy price cap saw average Standard Variable Tariffs (SVT) fall from £1,928 from January 2024 to £1,690 from 1 April.
However, falling energy prices were partially offset by rising motor fuel costs.
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The average price of petrol rose by 3.3p per litre between March and April 2024 to stand at 148.1ppl, up from 145.8ppl in April 2023. Diesel prices rose by 3ppl in April 2024 to stand at 157.1ppl, down from 162.4ppl in April 2023.
These movements resulted in overall motor fuel prices falling by 0.3% in the year to April 2024, compared with a fall of 3.7% in March.
Elsewhere, the prices of food and non-alcoholic beverages increased by 2.9% on April 2023, a dip from 4% recorded in the year to March. Shoppers can take a moment to breathe a sigh of relief, as this figure is the lowest annual rate since November 2021.
The prices of tobacco and alcohol remained largely the same between March and April, but rose by 8% in the year to April, a drop from 11.9% in the year to March.
‘Psychological milestone’
Myron Jobson, senior personal finance analyst at Interactive Investor thinks the inflation figures are “a huge step in the right direction for personal finances”.
Jobson said: “It is a psychological milestone that will make many Britons feel good about where prices are heading after having to endure higher costs for necessities for a prolonged period.
He added it also gives rise to hopes that the UK central bank “is on the verge of succeeding in its effort to rein in price increases”.
“While the inflation report is unlikely to change expectations for when the Bank of England will begin to cut interest rates on its own, it could prove to be a significant development that gives policymakers confidence that inflation is returning to normal – one of the prerequisites to cutting the base rate.”
‘Millions are still struggling’
However, the CEO of TotallyMoney, Alastair Douglas feels that “while the news that inflation’s slowing is clearly a good thing, it doesn’t mean life is getting any easier.”
Douglas said: “The cost of living isn’t getting any cheaper — it’s just taking longer to get more expensive — meaning it’s likely that the millions of people who were struggling a year ago, still are today.
“Although the Bank of England and Government might both claim victory over the war on inflation, the truth is that mortgage arrears and repossessions are rising, unemployment is increasing, and 2.8 million adults are unable to work as a result of long-term sickness. Inequality is growing, and it’s impacting people’s wellbeing.”
On the potential for interest rates to reduce this summer, Douglas added: “Even though there’s a lot of talk around rate cuts, it’s important to remember that if and when it does happen, it’s unlikely it’ll suddenly drop below 5%.
“Higher rates are here to stay, and each day, more than 4,000 homeowners face a fresh financial shock when their existing fixed-rate deal comes to an end. Back in 2019, the average five-year fix was 2.89%, and now the average two-year deal is more than double that, at 5.91%.”
