UK inflation in May held steady at 2.8%, defying earlier expectations of a rise. Economists had anticipated a surge to 3%, but the Office for National Statistics (ONS) reported that inflation remained unchanged due to increased transport costs being balanced out by a decline in food prices.
The price of airfares, vehicle taxes, and petrol all saw upticks during the month. Petrol prices reached an average of 157.4p per litre, while airfares spiked by 10.3% month-on-month, largely influenced by holiday seasons like Easter and school breaks.
However, the inflationary pressure on food prices eased across various categories such as meat, dairy, and vegetables. Food and drink inflation dropped from 3% to 2.2%, marking its lowest level since December 2024.
Inflation reflects the pace at which prices of goods and services escalate over time. The Bank of England foresees inflation climbing to as high as 3.6% in the upcoming months due to repercussions from conflicts in the Middle East.
This update comes just ahead of the Bank of England’s forthcoming interest rate announcement, with most economists expecting the base rate to remain at 3.75%. The Bank of England’s target inflation rate is 2%, and it utilizes interest rates as a tool to manage price increases.
Grant Fitzner, Chief Economist at ONS, noted that despite varied price movements, inflation stayed stable in May. The rise in transport costs was counteracted by lower food prices, including reductions in meat, dairy, and vegetable prices compared to the previous month.
Chancellor Rachel Reeves emphasized the government’s economic strategy to mitigate the impact of global price surges, maintaining stability in inflation. Measures such as energy bill reductions and freezes in fuel duty and rail fares are aimed at shielding households and businesses from rising costs to foster a resilient economy.
