UK: Inflation drops to 2.8% as oil prices slide

Goverment figures shows annual inflation rate, measured on consumer price index, slipped to 2.8% in May from 3% in April.

Inflation has slipped to its lowest level in two and a half years, in a rare piece of good news for Britain’s recession-hit households.

The Office for National Statistics said the annual inflation rate, measured on the consumer price index, slipped to 2.8% last month from 3% in April, as falling oil prices fed through to cheaper petrol at the pump. The ONS cited motor fuels as the biggest factor, with petrol prices falling by 4.5p a litre in a single month, to stand at £1.37. During May, the cost of a barrel of Brent crude oil on international markets slipped from $120 to $103. It has since fallen further, to $83. On the retail price index measure, which also includes housing costs, inflation slipped to 3.1% in May from 3.5% a month earlier.

Though inflation is still well above the Bank of England‘s target of 2%, the fall should help to reassure policymakers that they can take more action to stimulate the economy without sparking a renewed surge in prices.

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