UK inflation unexpectedly stays at 2.8% as food price falls offset transport costs | Inflation
Official figures showed that UK inflation remained at an unexpected 2.8% last month, with rising transport and fuel costs offset by slower increases in food prices.
The annual price rise recorded by the Office for National Statistics in May came despite the feared impact of the conflict in the Middle East on energy prices, dashing economists’ forecasts of a 3% increase.
The flat figure comes after the consumer price index fell to 2.8% in April as cuts to domestic energy bills announced by Rachel Reeves in last year’s budget came into force.
ONS chief economist Grant Fitner said: “Inflation remained stable in May as various price movements offset each other. The main upward move came from transport, with flights, vehicle taxes and oil prices pushing inflation up.”
“These were offset by lower food prices, with the cost of domestic heating oil falling following the climb in recent months, as well as inflation declines in various meat, dairy and vegetable items compared to last month.
“While the annual cost of raw materials continues to rise due to increases in the cost of chemicals, the increase in the cost of goods leaving factories has also slowed down, partly due to the decline in the cost of domestically produced cars.”
Chancellor Rachel Reeves said: “While the war in the Middle East is pushing up prices globally, we have the right economic plan and inflation remains stable.
“We are protecting families and businesses from rising costs through cuts to energy bills and a freeze on fuel duties and rail fares. This is the right economic plan to build a stronger, safer Britain.”
The reading for Bank of England policymakers as they prepare to set interest rates on Thursday is still above the government’s 2% target. They are expected to keep borrowing costs at 3.75% for now while they assess the impact of the conflict.
The closure of the Strait of Hormuz to shipping has increased oil prices in the last three months, with effects on the costs of fuel products, chemicals and fertilizers.
Economists hope that the agreement reached between Donald Trump and the Iranian regime at the beginning of the week will help ease price pressures by reopening sea blockages in the coming weeks.
