UK inflation remains unexpectedly steady at 2.8%

UK inflation in May remained unchanged at 2.8% in May, despite the Iran war sending prices higher worldwide, the Office for National Statistics (ONS) has said.

Experts had predicted a slight rise in inflation for last month, but lower food prices helped offset higher airfares and fuel prices, the ONS said.

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation was recorded at 2.8% in May, the same rate as in April.

It was lower than expected by economists, who had predicted an uptick in inflation to 3%.

The CPI inflation had slowed to its lowest level in more than a year in April, due to a decline in household energy prices for the month.

Ofgem lowered its energy price cap from the start of April by 7%, or £10 a month, for the average household using both electricity and gas, following government measures to reduce bills.

It meant that inflation declined for that month, despite a jump in fuel costs caused by the conflict in the Middle East.

In response to the figures, Chancellor Rachel Reeves said: “While the war in the Middle East pushes prices up globally, we have got the right economic plan and inflation has held steady.

“We’re protecting families and businesses from rising costs, with cuts in energy bills and freezes in fuel duty and rail fares.

“This is the right economic plan to build a stronger more secure Britain.”

ONS Chief Economist Grant Fitzner said: “After last month’s slowdown, inflation held steady in May as various price movements offset each other.

“The main upward movement came from transport with airfares, vehicle taxes and petrol prices all pushing up inflation.

“These were offset by lower food prices, with decreases in inflation seen across a range of meat, dairy and vegetable items compared to last month, as well as the cost of domestic heating oil, which fell back after climbing in recent months.

“The annual cost of raw materials continued to increase, led by rises in the cost of chemicals, while the increase in the costs of goods leaving factories slowed, partly due to a drop in the cost of domestically produced cars.”

Bank of England forecasts from April predicted that inflation would average around 3.1% in the second quarter of this year and peak at around 3.6% in a more benign scenario related to the Middle East conflict.

On Thursday, policymakers at the central bank will vote on whether to maintain interest rates at their current rate of 3.75% or increase or decrease this rate.

The Bank is expected to hold off on an interest rate hike, despite concerns that the Middle East conflict will push the cost of living higher.