The UK inflation rate eased marginally in May, but not enough to shift expectations for a cut in interest rates. According to the Office for National Statistics (ONS), the consumer price index climbed 3.4% in the year to May, slipping just below the 3.5% recorded in April.
Inflation Rate Holds Above Forecasts
However, the figure edged past the 3.3% predicted by market analysts, dampening hopes that the Bank of England will lower interest rates at its upcoming meeting on Thursday.
The stubbornly high inflation rate reinforces the cautious stance taken by many members of the Bank’s Monetary Policy Committee (MPC).
Officials have emphasised the need to be “gradual and cautious” in easing monetary policy. Persistent inflation pressures remain, especially in areas like energy and housing, complicating the case for any immediate rate relief.
The latest inflation figures are a setback for Chancellor Rachel Reeves, who had been hoping for a steeper drop. Higher inflation means continued pressure on households and businesses struggling with elevated borrowing costs.
It also affects government finances, as roughly 25% of the UK Treasury’s debt interest is directly tied to inflation rates.
Inflation Target Still Elusive
UK inflation has hovered above the Bank of England’s 2% target for over three years. A hike in household energy prices in April has further delayed any substantial drop, with the Bank not expecting significant relief until late summer.
The situation leaves consumers, mortgage-holders, and policymakers alike in a holding pattern as the UK economy navigates stubborn price pressures.
