Our main stories today:

Anglo American has rebuffed a third takeover attempt by Australia’s BHP after it sweetened its offer in an attempt to create a global mining titan.

BHP said it had submitted an “increased and final” £31.11 a share bid for Anglo, which values the company at £38.6bn, earlier this week.

The FTSE 100 miner had already rejected two previous offers from BHP: the first, in April, valued it at £31bn and the second, which was snubbed earlier this month, put it at £34bn.

The attempted BHP takeover, the largest ever in the mining sector, would create a global player in markets for commodities including copper, iron ore, potash and metallurgical coal used for steelmaking.

UK inflation fell to 2.3% in April – its lowest level for almost three years – but the decline was smaller than expected, denting hopes of an early interest rate cut.

City analysts had forecast the annual increase in the cost of goods and services would fall to 2.1%, close to the Bank of England’s 2% target.

Markets responded by trimming their predictions that the Bank would cut rates from their current 5.25% level as early as next month, with forecasts of a reduction in August also scaled back.

Other big stories:

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Breaking: Australia’s BHP has sweetened its offer to buy rival Anglo American, a deal that would create a global mining giant, but that third takeover proposal was swiftly rejected.

BHP’s all-share share offer is worth £31.11 per Anglo American share based on the 22 April closing price, it said. It values the company at £38.6bn.

Anglo said the latest proposal valued its shares at £29.34 based on the 23 April closing price. It has agreed to enter talks with its larger rival – although BHP has described its offer as “final”.

Anglo had rejected two previous offers from BHP: the first, in April, valued it at £31bn and the second at £34bn, which was snubbed earlier this month.

BHP hopes ink the takeover the FTSE 100 company – the largest ever in the mining sector – to create a global player in markets for commodities including copper, iron ore, potash and metallurgical coal used for steelmaking, my colleague Alex Lawson reports.

Copper in particular is in high demand as a raw material in the transition to low carbon energy as it is used in manufacturing components for electric vehicles and renewable energy projects. Anglo American’s key assets are copper mines in Chile and Peru.

Labour has accused the government of indulging in a “tone deaf victory lap” after UK inflation hit its lowest level in nearly three years.

Treasury minister Bim Afolami, making a statement to the Commons, said:

The ONS data released today shows that CPI inflation has fallen to 2.3%, a return to normal levels last seen before the pandemic and Russia’s invasion of Ukraine. Earlier this week the IMF said the UK economy is approaching a soft landing and it upgraded its forecast for UK growth in 2024.

Having seen lower inflation accompanied by stronger than expected growth in the first quarter, these developments are proof that the Government’s plan is working, that the difficult decisions we have taken are paying off and the UK economy really is beginning to turn the corner.

Afolami added:

Now is not the time to change course because when it comes to Labour’s policies on jobs, welfare reform and tax, we know the difference if they’re elected will be profound and damaging for every family in this country.

But shadow Treasury minister Tulip Siddiq said:

Of course it is welcome that the rate of inflation is finally slowing after three years of the Government missing every single target.

But, to be frank, the tone deaf victory lap we are seeing from the government today will feel like a slap in the face to the British people who after 14 years of Conservative chaos are still significantly worse off.

Meanwhile, the former chief executive of the Post Office, Paula Vennells, has broken down in tears mid-evidence to the Horizon inquiry, as she apologised for telling MPs the Post Office was successful in every court case against subpostmasters, during a morning session in which she also said she does not think there was a conspiracy, but that mistakes were made.

It is the first time she has appeared before the Horizon inquiry, and she will be questioned further in the days to come.

You can follow the latest on the hearing here:

Rachel Reeves, Labour’s shadow chancellor of the exchequer, said on X this morning:

The latest official UK house price and rent figures are out.

Average home prices climbed by 1.8% in March, the first annual increase since last June, according to the Office for National Statistics.

Average private rents rose by an annual rate of 8.9% in April, down from 9.2% in March but still high – bringing little reprieve for renters.

Government borrowing rose to £20.5bn last month, the fourth-highest April figure on record, and the highest borrowing since April 2021, as we reported earlier.

Public sector receipts grew by £1.6bn compared with April last year, but this growth was outstripped by a £3.1bn jump in spending.

The Office for National Statistics has increased its estimate of borrowing in the financial year ending March by £800m to £121.4bn, now £7.3bn more than the £114.1bn forecast by the Office for Budget Responsibility.

The UK’s net debt at the end of April, excluding the banking bailout during the financial crisis, was 97.9% of gross domestic product – this was 2.5 percentage points more than at the end of April 2023, and remains at levels last seen in the early 1960s.

Alex Kerr, assistant economist at Capital Economics, said:

April’s public finances figures got the new 2024/25 fiscal year off to a shaky start and cast further doubt on the chancellor’s ability to unveil big tax cuts at another pre-election fiscal event later this year.

Overall, the chancellor will be disappointed that April’s figures do not provide more scope for tax cuts at a fiscal event later this year. Moreover, we expect slower nominal GDP growth and wage growth to dampen tax receipts growth later this year. And the rise in market interest rates since March’s budget alone suggests he may have even less fiscal ‘headroom’ (perhaps about £6.5bn) for tax cuts than the £8.9bn left over in March.

My colleague Kalyeena Makortoff has listened to Jeremy Hunt, the chancellor, talking about inflation on the BBC radio 4 Today programme. He said:

It is good news that inflation is now lower than in the eurozone or in the United States of America [inflation is 2.4% in the eurozone and 3.4% in the US], but prices are still a lot higher than they were a year ago so I think it will take time for that pressure to ease on family budgets.

But when we’re talking about the future I think what people will be heartened by is yesterday the International Monetary Fund confirmed that they believe that the UK economy will grow faster over the next six years than France, Germany, Italy or Japan…

But that doesn’t mean that people at home will be feeling immediately better because we’ve been through a very, very difficult period with a pandemic and energy crisis…

Question: “…And your government. We had Liz Truss for just a few days and some of the shocks are still being felt by more than a million who will be coming out of their mortgages this year and having to pay much higher prices.”

Hunt responded:

Well I accept that mistakes were made…

Q: “More than mistakes, Mr Hunt.”

The chancellor said:

Well let me answer the question. Mistakes were made and I corrected those mistakes and Rishi Sunak did, as one of the first things we did. But it is wrong to say that the pressures that people are feeling, the majority of those pressures are from those short period…the point I’m making is that living standards have fallen by more in Germany, Austria or Sweden and so the majority of what people are feeling is the result of a global pandemic and an energy shock.

And in an election year, what I will be saying is those difficult decisions – which mean going actually back to 2010 that we’ve created more jobs than nearly anywhere else in Europe. That’s happened because conservative governments have taken difficult decisions on a flexible labour market, on getting down taxes, on welfare reform.

We reported yesterday that Hunt is preparing a pre-election cut in national insurance despite a warning from the International Monetary Fund of a looming £30bn hole in the public finances, Downing Street has indicated.

David Hollingworth, associate director at the mortgage broker L&C Mortgages, said:

It’s good news to see the headline rate of inflation drop back so much closer to the Bank of England target rate of 2% but at 2.3% it may also bring some disappointment for those looking for signs of an imminent cut to base rate.

The figures are at the higher end of forecasts and could see expectations for base rate to hold at a higher level for longer yet.

Mortgage rates have eased back a touch in recent weeks, but today’s figures may well hold back the chance for that to become a stronger trend. A big fall in inflation was already expected and therefore already priced into fixed rates.

Mortgage borrowers may have to wait a little longer for base rate to fall and the recent ups and downs in mortgage rates should underline the ongoing uncertainty. Holding off in the hope of rates dropping could make for a bumpy ride for homeowners.

The FTSE 100 index has fallen 0.6% and is set for its biggest daily drop in a month, after UK inflation slowed less than expected in April, both the headline and core rates.

Services inflation was also higher than expected, and markets have scaled back rate cut expectations.

European indices are also drifting lower, with the Dax in Frankfurt and the CAC in Paris both down 0.3%.

The pound rose 0.4% after the inflation numbers, and is still trading 0.3% higher at $1.2748.

The shares of UK housebuilders are down, including Persimmon, Barratt and Taylor Wimpey, with hopes of an early interest rate cut dashed.

Bucking the trend in London is Marks & Spencer, the biggest riser on the FTSE 100, up 7.5%. It increased annual profits by 41% which was better than expected, but also warned it will ramp up cost cuts in the year ahead.

Our retail correspondent Sarah Butler reports:

Stuart Machin, the boss of the clothing, homewares and food retailer, said it was “at the beginnings of a new M&S” with “wind in our sails, and confidence that our plan is working” as pretax profits rose to £672.5m in the year to 30 March. Sales rose 9.4% to £13bn.

He said M&S had increased its market share in both clothing and homewares and was “confident we will make further progress” in a bullish prediction for the year ahead.

The upmarket grocer said it had benefited from a shift towards eating at home rather than at restaurants with sales of its ‘dine in’ offer up by more than 40% while shoppers were also spent 34% more on its lowest price “Remarksable Value” range.

Clothing and home sales rose 5.3%, helped by a 15% rise in sales of holiday gear such as swimsuits while sales of its more expensive Autograph range for men rose 15%.

There is still “much more to be done” to drive down inflation, Labour’s Darren Jones said, pointing to energy measures which could prevent inflationary spikes in the UK in future.

The shadow Treasury minister said inflation had “come down a bit” when speaking to Sky News, but said this was “largely driven by a drop in the energy price cap”.

Core inflation – which strips out volatile things like food and energy – came in at 3.9% in April, down from 4.2% in March. Jones said this

is hotter than the markets were expecting it to be (3.6%). This is not out of the woods yet. It is in the right direction but there is still much more to be done.

Jones pointed to Labour’s “securonomics” agenda, which includes measures to build “homegrown, secure, renewable energy”.

The shadow minister said: “

The one reason that the headline rate of inflation has come down closer to 2% today even though the cost of other things are remaining a bit too high is because of the energy bills.

The problem there is if something happens in the world and gas prices rocket again, we are going to be back into that inflationary environment with very high bills.

Financial markets have scaled back their expectations for an interest rate cut in June, and August is also looking slightly less likely. They are forecasting a reduction by September, though.

Before today’s inflation data, which showed services inflation is more stubborn than expected, markets had fully priced in two rate cuts this year, one by August and another one before the end of the year. Investors are now split on whether there will be a second reduction.

The probability of a June rate cut is now seen at less than 15%.

Despite the slowdown in inflation, the cost of living crisis is not over, according to Paul Nowak, general secretary of the Trades Union Congress (TUC).

Nowak said:

The cost-of-living crisis is not over - no matter how much ministers pretend it is. Prices are still going up. Food and energy bills are much higher than a couple of years ago. And many are being hit by soaring mortgage repayments.

While Nowak welcomed the lower rate of inflation he added that “millions up and down the country are still having to cut back on everyday essentials”.

That’s because household budgets have been decimated by the highest price rises in the G7 and wages have flatlined over the last 14 years.

Pay packets are still worth less today than in 2008, with working people on course to end this Parliament poorer than at the start.

Make no mistake - the Tories have delivered the worst period for living standards in generations.

However, despite the record fall in energy costs and lower food prices, services inflation – the single most important indicator for the Bank of England – came in at 5.9%, much higher than analysts had expected (5.4%) or the Bank’s own forecast (5.5%).

This reduces the chances of an interest rate cut at the June meeting, said James Smith, developed markets economist at ING, but noted that services inflation can be volatile and May’s figures should give a better idea of where inflation is headed.

We’ve long felt that this reading had the potential to be highly volatile owing to a multitude of annual price hikes that kick in at the start of the financial year, and that’s exactly what we’ve seen.

We saw a very similar surprise last April, and much like then, we’ve seen a highly unusual and significant spike in rents. Last year this was subsequently revealed to be linked to social rents, which the ONS updates once per quarter in the index. That seems to explain much of the surprise, but there were sizeable month-on-month increases in a range of other service-sector categories too.

Importantly, this doesn’t tell us too much about the trajectory of inflation – by definition much of this is linked to one-off annual price adjustments. This time last year, markets wrongly inferred from the April figures that the UK was in a more serious situation when it came to inflation than other economies. It would be a mistake to assume something similar again, and May’s figures should be more predictable.

Turning to interest rates, he said:

The figures therefore aren’t a total game-changer for the Bank of England which will look at the numbers and see more noise than signal. But we think it does reduce the chances of a rate cut at June’s meeting, even though we’ll get another set of data before that decision.

We certainly wouldn’t rule it out though. The Bank is visibly divided and with very few media appearances by the internal committee members, it’s frankly impossible to know how the deciding votes are likely to be cast. However, today’s data supports our long-held base case that the first rate cut will come in August, which offers the BoE an extra inflation print to be more confident about the underlying trend. For now, we’re sticking with that.

Rishi Sunak has also commented on the inflation figures, saying:

Today marks a major moment for the economy, with inflation back to normal.

This is proof that the plan is working and that the difficult decisions we have taken are paying off.

Brighter days are ahead, but only if we stick to the plan to improve economic security and opportunity for everyone.

Let’s dig a bit deeper into the inflation figures.

The ONS said it was the lowest annual inflation rate for electricity, gas and other fuels on record.

Prices of electricity, gas and other fuels fell by 27.1% in the year to April, the largest drop since records started in 1989. Gas prices fell by 37.5% on the year, compared with a fall of 26.5% in March, while electricity prices fell by 21%, compared with 13% in March.

In other good news for consumers, food prices slowed to the lowest annual rate since November 2021.

Prices of food and non-alcoholic beverages rose by 2.9% in the year to April, down from 4% in March. The rate has eased for the 13th consecutive month from a recent peak of 19.2% in March 2023, the highest annual rate seen for over 45 years.

The main downward effects came from a combination of bread and cereals, meat, dairy products, vegetables, and soft drinks. In each case, the annual rate was the lowest seen for at least two years.

The annual rate eased in eight of the 11 food and non-alcoholic beverages classes, the exceptions being oils and fats, fish, and hot beverages.

The inflation figures are a bit of a disappointment for the chancellor Jeremy Hunt. And the public finance figures aren’t good either.

The government borrowed £20.5bn last month, the fourth-highest April borrowing since monthly records began in 1993.

Borrowing – the difference between public sector spending and income – was £1.5bn more than in April 2023 and £1.2bn more than the £19.3bn forecast by the Office for Budget Responsibility (OBR).

Inflation in the UK has slowed to an annual rate of 2.3%, down from 3.2% in March, on lower energy costs.

Economists had expected a larger slowdown to 2.1%. March’s slowdown was also not as big as expected.

The Office for National Statistics said:

Falling gas and electricity prices resulted in the largest downward contributions to the monthly change in both CPIH and CPI annual rates, while the largest, partially offsetting, upward contribution came from motor fuels, with prices rising this year but falling a year ago.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Inflation in the UK is expected to have slowed further, to an annual rate of 2.1% in April from 3.2% in March, figures from the Office for National Statistics are expected to show at 7am BST.

Investec economist Ellie Henderson explains:

1 April is frequently referred to as ‘National Price Hike Day’ due to firms and governments often increasing prices at the start of the new financial year. For example, in April we traditionally see price hikes in TV, broadband, train fares and water bills.

But for inflation, what is key is the size of the monthly increase relative to last year. Although many consumers experienced large price rises in April, for the most part, these were smaller increases than last year, and thus will subtract from inflation.

As such, we have many downward influences on inflation. But the largest by far stems from gas and electricity prices. In February Ofgem announced that its energy price cap would fall by 12% in April. This feeds mechanically into the inflation calculation and knocks 0.4 percentage points off headline inflation.

But this effect is already baked in the pie, so to speak. The Bank of England knew when making its forecasts as part of the May Monetary Policy Report that there would be a large push lower due to energy. There are questions how prices in other sectors evolve, particularly within services, where inflation has remained particularly stubborn. Labour costs are key to this, and these would have risen for many firms in April due to the near 10% rise in the National Living Wage.

We will also get UK public finance data for April at the same time.

Later this morning, the former Post Office chief executive Paula Vennells will testify to the long-running Horizon inquiry. It is a moment wrongly convicted post office operators have waited years for. The inquiry is looking into how hundreds were pursued in the courts, fined and jailed over accounting shortfalls that were actually the fault of the Horizon IT system.

Vennells, who held the top job between 2012 and 2019, has become the highest-profile face of the scandal since the ITV drama Mr Bates vs the Post Office galvanised public opinion when it was screened in January – despite her keeping a low public profile in the past decade.

Jane Croft has looked at the key questions Vennells must answer. You can watch the hearing live here.

The Agenda

• 10am BST: Former Post Office CEO Paula Vennells to appear before Horizon inquiry

• 9.30am BST: UK house prices/rents for April

• 5pm BST: Deadline for BHP to make a firm offer for Anglo American or walk away

• 7pm BST: US Federal Reserve Open Market Committee minutes