Prices rose at 2% in the year to May, down from 2.3% the month before, official figures show.
The economy is a key talking point in the run-up to the general election on 4 July, with all of the main parties battling over how they would keep the cost of living under control.
The Conservatives said their “difficult decisions” were paying off, but Labour said pressures on family finances were “still acute”.
The drop in May’s inflation figure was driven by a slight fall in prices for food and soft drinks, and slower price rises for recreation and culture and furniture and household goods.
However, petrol prices are rising again, and food prices are still 25% higher than at the beginning of 2022.
The inflation figure comes ahead of the Bank of England’s latest decision on UK interest rates this Thursday.
The bank is expected to hold the rate at 5.25% – a 16-year high – for the seventh meeting in a row. Markets are not betting on a cut until August.
Inflation has fallen steadily since October 2022, when Russia’s invasion of Ukraine caused it to peak at 11.1% as food and fuel prices soared.
But millions of households are still struggling with the cost of living.
Even though inflation is falling, it does not mean the prices of goods and services overall are coming down, just that they are rising at a slower pace.
The Bank of England has also put up interest rates to try to dampen down consumer demand, driving up mortgage rates and rents.
Official figures on renting – also released on Wednesday – showed average rents paid to private landlords in the UK rose by 8.7% in the year to June.
Meanwhile, even with the inflation rate falling, mortgage rates remain stubbornly high as lenders wait for the Bank of England’s next and subsequent moves on interest rates.
UK inflation is now rising at its slowest pace since July 2021.
It is also lower than in the eurozone and the US, where rates were 2.6% and 3.3% in May respectively.
However, the UK is not out of the woods yet, with price rises in the services sector still high.
Yael Selfin, chief economist at KPMG UK, said services inflation was still “uncomfortably high” and the Bank would need to see a continued fall before cutting rates.
David Bharier, head of research at lobby group the British Chambers of Commerce, said May’s inflation figure provided “additional weight for an interest rate cut in the coming months”.
Source – BBC News website