UK inflation drops to Bank of England's 2% target for first time in nearly three years

UK inflation has eased to 2% - increasing the prospect of an interest rate cut within months.

The consumer prices index (CPI) rate for the year to May was recently confirmed by the Office for National Statistics (ONS).

The figure indicates that prices are still rising, but at the slowest pace since July 2021.

The ONS said the drop was largely down to falling food prices, while the cost of motor fuel rose slightly.

Officials added that core inflation, which strips out volatile elements such as food and energy, fell to 3.5% in May, in line with expectations.

However, some commentators expressed concern that services inflation - which covers sectors such as the hospitality industry - had only fallen from 5.9% in April to 5.7% in May.

Financial markets had previously priced in expectations of an interest rate cut in August - but that shifted towards a reduction being made in September instead.

The latest figures come following a sustained period of high inflation in the UK, which peaked at 11.1% in October 2022 - the highest level since 1981.

The Bank has been steadily increasing rates since December 2021 as part of efforts to bring down inflation - which soared in the wake of the COVID pandemic and amid the war in Ukraine - to its target of 2%.