The British Independent Retailers Association (Bira) said the inflation rate fall to 2.3 per cent is a good step to help bring people back to the high street – but stresses the Bank of England needs to now reduce interest rates too.
Bira, which works with over 6,000 independent businesses of all sizes across the UK, has reacted to the news that the UK inflation rate has fallen to a figure just below the Bank of England's target of two per cent. This marks the lowest level in almost three years.
The fall, which is the lowest level in almost three years, means prices are still rising but just at a slower rate. Energy prices are at the heart of this, as they fell by 27.1 per cent in April.
"Inflation has fallen lower than expected and is now only slightly above the Bank of England target of two per cent," said Andrew Goodacre, Bira CEO. "Although the services sector and core inflation has not fallen as much, we hope that the Bank of England will have the confidence to reduce interest rates.
"Reducing interest rates is crucial to fully restoring consumer confidence and bring people back to the high streets," he said.
Julian Jessop, Economics Fellow at the free market think tank, the Institute of Economic Affairs also commented that the fall was another big step in the right direction.
"Admittedly, the ‘core’ rate excluding food and energy, at 3.9 per cent, was still nearly twice the MPC’s two per cent target for headline inflation," he added, noting that services inflation remained high, at 5.9 per cent.
"Nonetheless, this should not prevent the Bank of England from cutting rates in the summer. April was always going to be a tricky month as wages and other costs which are indexed to inflation caught up with the previous increases. The unusually large hike in the National Living Wage took effect last month too.
"However, these are lagging indicators and policy should be forward-looking. Monetary growth has now settled at rates consistent with low and stable inflation, and there are plenty of signs that the labour market is cooling. Energy and food inflation also have further to fall.
"Indeed, the first interest rate cut could still come in June. The MPC will then have another set of inflation and labour data and more evidence on the latest pay settlements. If not June, then rates should be cut in August. Any further delay would risk tipping the economy back into an unnecessary recession."
