ONS REVEALS UK INFLATION WAS 3.4% IN MAY – The central bank said in May it expects inflation to peak at about 3.7% later this year
Inflation came in at an annual rate of 3.4% in May, down from an originally published 3.5% in April, the Office for National Statistics have revealed.
Earlier this month the ONS said April’s consumer price inflation reading of 3.5% had been overstated by 0.1 percentage points due to an error in car tax data from the government.
Gas, electricity and water prices rose in April alongside higher taxes on employers, causing the inflation rate to leap from 2.6% in March. A rise in oil prices since the start of the Iran-Israel conflict last week could cause inflation to rise again.
Chief Economist Huw Pill said last month the pace of interest rate cuts was too fast given still strong wage pressures on inflation, but his vote in May to keep borrowing costs on hold was likely to be “a skip” not a halt to rate cuts.
Market pricing on Tuesday June 17th pointed to an 87% chance that the BoE will leave rates on hold this week, with two 0.25 percentage-point cuts priced in by the year’s end.
The BoE lowered rates by a quarter point to 4.25% on May 8 in a three-way split vote, with two Monetary Policy Committee members favoring a bigger cut and two – including Pill – favoring a hold.
The central bank said in May it expects inflation to peak at about 3.7% later this year. Some economists think April might prove to be the high point although the conflict in the Middle East poses a risk of stronger price pressures.
