Households have gained a bit more spending power as inflation drops to 2.8% in May closer to the Bank of England set goal of 2.0%.  Experts give credit for the decline to the falling cost of petrol.  Petrol prices fell by 4.5p per litre to an average of £1.37 in one month according to the Office for National Statistics (ONS).  The current level of inflation is the lowest level in two and one half years as it fell from the April level of 3%.

The ONS measures the inflation level on the consumer price index (CPI).  The retail price index (RPI) fell to 3.1% in May from 3.5% in April.

Economists are expecting the Bank of England to offer more quantitative easing (QE) in the next Monetary Policy Committee (MPC) meeting that will occur in the beginning in July.  The minutes for the June meeting of the MPC are due to be published today and will reveal the tone of the meeting and how close the vote was for offering more QE in June.

Philip Shaw of Investec said, “We consider that there is a very good chance that the MPC will turn the QE taps back on next month. With inflation coming down sharply over the past couple of months, the economic data disappointing and global uncertainties rising, there doesn't appear to be much cause to hold back.”

Cathy Jamieson, shadow Treasury minister, said, “The fall in the inflation rate is welcome as last year's VAT rise continues to drop out of the figures, but families and pensioners are still facing a harsh squeeze on their incomes from this government's policies.”