Editor's PickInvesting

UK inflation cools to 3.4% in May as Bank of England holds rates

1 Mins read

The latest figures from the Office for National Statistics (ONS) also showed a fall in core inflation, which strips out volatile categories like food, energy, alcohol and tobacco. Core inflation dropped to 3.5 per cent, from 3.8 per cent in the previous month, offering policymakers some encouragement that underlying pressures are starting to subside.

Services inflation, a key metric closely watched by the Bank of England’s Monetary Policy Committee (MPC) as an indicator of persistent domestic price pressures, also dipped slightly—from 5.4 per cent in April to 5.3 per cent in May.

Despite the slowdown, the Bank is expected to hold interest rates steady at 4.25 per cent when the MPC meets on Thursday, as it awaits more consistent evidence that inflation is returning sustainably to its target.

Richard Heys, acting chief economist at the ONS, said the largest downward contribution to the monthly inflation figure came from transport, particularly air fares, which fell in May compared with a sharp rise during the same period last year. The timing of Easter and school holidays, which had pushed travel costs higher last spring, helped bring the annual comparison down. Petrol prices also contributed to the decline.

However, the downward momentum was partially offset by rising food prices, including chocolates and meat, as well as increased costs for furniture and household appliances, such as fridge freezers and vacuum cleaners.

Economists say that while inflation is on the right path, the Bank of England will need to see further falls in services and wage growth figures before it is confident enough to begin cutting interest rates. With inflation still more than a percentage point above the target, and services inflation remaining sticky, many analysts believe the Bank will remain in a holding pattern until later in the summer.

Markets are currently pricing in a rate cut by September, depending on the trajectory of wage data and inflation expectations.

Related posts
Editor's PickInvesting

Munro EV secures £2m to scale electric 4×4 production for mining, defence and construction sectors

2 Mins read
Scottish electric vehicle manufacturer Munro EV has secured £2 million in new investment from existing backer Elbow Beach and other investors to…
Editor's PickInvesting

Reeves to relax planning laws and target banks with £2bn tax rise in bid to stabilise public finances

2 Mins read
Rachel Reeves is poised to unveil a package of planning reforms and tax increases in her first full Budget on 26 November,…
Editor's PickInvesting

Reeves to relax planning laws and target banks with £2bn tax rise in bid to stabilise public finances

2 Mins read
Rachel Reeves is poised to unveil a package of planning reforms and tax increases in her first full Budget on 26 November,…
Power your team with InHype
[mc4wp_form id="17"]

Add some text to explain benefits of subscripton on your services.

Leave a Reply

Your email address will not be published. Required fields are marked *