The United Kingdom’s Consumer Price Index (CPI) remained at 2.8% last month, defying economists’ expectations for a shift. The unexpected stability in the headline figure resulted from opposing forces within the economy: rising air fares and administrative adjustments to road fuel duties were effectively counterbalanced by a widespread slowdown in food price growth.
According to official data, food inflation hit its lowest rate since late 2024. Prices for essentials, including meat, cheese, and vegetables, saw declines in May compared to April, reflecting a trend also observed in the Eurozone. Analysts suggest that recent producer price statistics indicate this downward pressure on grocery costs will likely persist over the next two months.
Forecasting Rate Cuts
Market analysts, including ING developed markets economist James Smith, project that overall inflation will crest below the 4% mark in the near term. Smith further anticipates that the current data trajectory supports a return to interest rate reductions by next year. Meanwhile, the Bank of England’s preferred gauge of core services inflation remains stable, hovering just below 4%, suggesting that underlying price pressures are contained despite volatility from the timing of holidays.
Source: The Guardian