And the Bank of England is likely to hold the interest rate at 5.25% – the highest for 16 years – when it sets interest rates on Thursday.
James Smith, research director at the Resolution Foundation, described the drop in inflation as “welcome”, but stressed that it would be no silver bullet.
“The legacy of a long period of very high inflation means there is unlikely to be much of a feel-good factor among families, as they continue to struggle with the higher cost of essentials,” he said.
“And while headline inflation is back to normal levels, domestically-driven services-price inflation remains elevated. This inflation will worry the Bank of England, and may give pause for thought when it comes to cutting interest rates.”
Services inflation – the amount that the cost of services are rising by – reached 5.7% in May.
Trade Union Congress general secretary, Paul Nowak, said that the fall in inflation masked three years of eye-watering price increases.
“Food and energy bills have surged. Rents and mortgages have skyrocketed. And real wages are still worth less than in 2008,” he said.
TUC analysis published this morning shows that unsecured household debt will rise by a “record” £1,660 this year as families continue to struggle with cost of living.
The Institute for Public Policy Research said preventing inflation shocks in future will require investment in the green transition.
“Falling inflation expectations by households and a cooling labour market suggest that the current inflation fight could be in its last round,” Carsten Jung, senior economist at IPPR, said.
“To further ease inflationary pressures and grow the economy, whoever wins the next election must urgently address the dire labour market situation, where a record number of people have left the labour force, often due to illness.
“Moreover, only huge investments in the clean energy transition can shield us from future inflation shocks from international oil and gas markets.”
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