UK inflation remained unchanged in May at 3.4%, offering no fresh momentum for interest rate cuts ahead of the Bank of England’s next policy meeting.
Figures released this morning by the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) held steady at 3.4% — matching April’s revised figure following a correction to previously overstated tax data. Core inflation eased slightly, dropping from 3.8% to 3.5%, but services inflation remains elevated at 4.7%.
The Bank of England’s base rate, currently at 4.25%, is now widely expected to remain on hold when the Monetary Policy Committee (MPC) announces its latest decision on Thursday.
Initial reports last month had placed April inflation at 3.5%, but the ONS has since acknowledged a data processing error linked to Vehicle Excise Duty, revising that figure down to 3.4%. May’s flat reading therefore signals no change in the headline rate.
Cheaper air fares and falling motor fuel prices helped hold CPI in check, with transport costs applying downward pressure. These gains were offset by rising prices in food and furniture. Food inflation remains stubborn at 4.4%, according to today’s bulletin.
With no significant shift in price trends, markets now expect the Bank to pause further rate cuts until August — the next scheduled MPC decision that coincides with an updated set of economic forecasts.
Three takeaways —
- Headline disinflation has paused
May’s figures reflect no real progress in bringing CPI down closer to the Bank’s 2% target. While core CPI fell slightly, it remains elevated — especially in wage-driven service sectors. - August becomes the key watchpoint
Businesses hoping for a rate cut this week are likely to be disappointed. With limited change in economic data, the MPC will want to wait until August’s forecast round before acting. - Borrowing conditions stay tight
The current 4.25% rate environment is set to continue. Firms planning new borrowing or investment should factor in higher-for-longer conditions at least through summer.
