Inflation has returned to the 2% target level for the first time in nearly three years - just weeks before the General Election.
The Office for National Statistics (ONS) reported that Consumer Prices Index (CPI) inflation dropped to 2% in May, down from 2.3% in April.
This follows almost three years of inflation exceeding the target, with CPI last recorded at 2% in July 2021, before it surged due to the cost-of-living crisis.
This data will be closely scrutinised ahead of the Bank of England's next interest rate decision on Thursday, although it is widely anticipated that any cuts will be postponed until after the election on July 4.
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Today's news comes less than three weeks before election day, as political parties focus on economic promises in their manifestos.
One Cabinet minister said this was “very significant news” which will allow the Tories to “bear down on taxes”. Work and Pensions Secretary Mel Stride told Times Radio: “We’re doing the right things for the economy and as you’ve just heard there, in terms of inflation now, very significant news this morning.
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“That is now down at 2%. That is bang on the Bank of England’s target of 2%. You’ll recall back in the autumn, it was up above 11%. And the Prime Minister quite rightly made it his key priority to get that figure down.”
But he evaded questions about top businesspeople including Phones4U billionaire John Caudwell abandoning the Conservatives for Labour, stressing that inflation “is very good for business, it’s very good for growth, it’s good for people’s living standards”.
Shadow chancellor Rachel Reeves said: “After 14 years of economic chaos under the Conservatives, working people are worse off. Prices have risen in the shops, mortgage bills are higher and taxes are at a 70-year high.
“Labour has a plan to make people better off bringing stability back to our economy, unlocking investment and delivering reform."
She added: “The choice at the election is simple: stability with Labour that will make Britain better off or five more years of chaos with the Conservatives that will mean higher mortgages.”
Confederation of British Industry (CBI) principal economist Martin Sartorius said: “Another fall in inflation in May will come as welcome news to households as we move towards a more benign inflationary environment.
“However, many will still be feeling the pinch due to the level of prices being far higher than in previous years, particularly for food and energy bills.
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“Today’s data sets the stage for the Monetary Policy Committee to cut interest rates in August, in line with our latest forecast’s expectations.
“However, rate-setters will still need to weigh the fall in headline inflation against signs that domestic price pressures, such as elevated pay growth, are proving slower to come down.
“This means that they are likely to move cautiously beyond August to avoid putting further upward pressure on inflation, especially as the growth outlook improves at home and geopolitical tensions remain heightened.”