UK inflation remained steady at 2.8% in May, defying expectations of a rise. Economists had foreseen a jump to 3%, but the Office for National Statistics reported that inflation held firm due to higher transport expenses being counteracted by a decline in food prices.
Airfares, vehicle taxes, and petrol prices all experienced increases during the month. Petrol prices reached an average of 157.4p per liter, while airfares surged by 10.3% month-on-month, mainly attributed to the Easter and school holidays.
Conversely, inflationary pressures on food prices eased across various meat, dairy, and vegetable products. Food and beverage inflation decreased to 2.2% from 3% in April, marking its lowest level since December 2024.
Inflation reflects the pace at which prices of goods and services escalate over time. Projections from the Bank of England anticipate inflation climbing to as high as 3.6% in the upcoming months due to repercussions from the Middle East conflict.
This update precedes the Bank of England’s imminent interest rate decision announcement, with most experts anticipating the base rate to remain at 3.75%. The Bank of England aims for 2% inflation and leverages interest rates to manage price hikes.
Grant Fitzner, Chief Economist at the ONS, noted that inflation stabilized in May following fluctuations in various price categories. Transport costs including airfares, vehicle taxes, and petrol prices pushed inflation upwards, but this was offset by lower food prices. Raw material costs continued to rise annually, driven by chemical price hikes, while factory goods cost escalation slowed down.
Chancellor Rachel Reeves stated that despite global price upswings due to the Middle East conflict, the UK’s economic strategy has kept inflation stable. Measures such as energy bill reductions and freezes on fuel duty and rail fares aim to shield families and businesses from cost escalations, reinforcing the government’s economic plan for a resilient Britain.