UK inflation eased slightly in May, in line with expectations, offering some relief after a sharp spike in April. However, a steep rise in food prices and persistent cost pressures in key sectors continue to weigh on household budgets.
According to the Office for National Statistics (ONS), consumer prices rose by 3.4% in the 12 months to May, matching forecasts from a Reuters poll of economists and the Bank of England. The figure marks a slight decline from April’s 3.5% reading, which had been inflated due to an error in government car tax data. While the April figure was not revised, the corrected data was applied to May’s reading.
A major contributor to the slowdown was a sharp fall in air fares, which had spiked in April due to the Easter holidays. However, food inflation accelerated sharply, rising by 4.4% year-on-year—the fastest pace since February 2023—adding pressure on low-income households.
Services inflation, a key indicator closely watched by the Bank of England, fell to 4.7% in May from 5.4% in April, in line with the central bank’s own forecast. The Reuters poll had projected a slightly higher figure of 4.8%.
Despite the modest easing, the data is unlikely to change expectations ahead of the Bank of England’s monetary policy decision on Thursday. Economists widely anticipate that the central bank will keep interest rates steady at 4.25%, following a divided vote in May. Market pricing suggests an 87% chance of a hold, with two rate cuts of 0.25 percentage points expected by year-end.
The inflation picture remains complicated. Prices for gas, electricity, and water rose in April alongside an increase in employer taxes, contributing to the jump in April’s inflation rate from 2.6% in March. Rising oil prices, triggered by renewed conflict between Iran and Israel, could further impact inflation in the months ahead.
Some Bank of England policymakers remain cautious. Chief economist Huw Pill has argued that expectations of rapid rate cuts may be premature, citing ongoing wage pressure and the risk of inflation becoming embedded. Though he voted to hold rates in May, he described the move as a “skip,” rather than a signal of long-term inaction.
The Bank currently expects inflation to peak around 3.7% later this year, but geopolitical uncertainties and global commodity fluctuations could challenge that outlook. Some economists believe April may have marked the high point—unless external shocks force another upward swing.
