UK inflation edged down to 3.4% in May, offering a modest sign that price pressures across the economy are beginning to ease. The latest data from the Office for National Statistics (ONS) shows a slight decline from April’s 3.5% figure, though inflation remains well above the Bank of England’s 2% target.
Core inflation — which excludes volatile items such as food, energy, alcohol, and tobacco — also declined, falling to 3.5% from 3.8% in April. This drop in underlying price growth has been welcomed by economists and policymakers as a sign that inflationary momentum may be starting to slow.
Services inflation, a key indicator monitored closely by the Bank of England’s Monetary Policy Committee (MPC), dipped marginally from 5.4% in April to 5.3% in May. This measure is seen as a gauge of domestic inflation persistence, and any reduction offers some reassurance to the central bank.
Despite these developments, the Bank of England is widely expected to keep interest rates on hold at 4.25% when the MPC announces its policy decision on Thursday. Analysts believe the Bank will wait for more sustained evidence that inflation is on track to meet its long-term target before easing monetary policy.
“The biggest downward driver this month was transport, especially air fares,” said Richard Heys, acting chief economist at the ONS. He noted that travel costs fell in May, in contrast to a sharp rise during the same period last year. The timing of Easter and school holidays, which fell in April this year, contributed to a more favourable annual comparison.
Petrol prices also fell, further easing inflationary pressure. However, these gains were partially offset by rising costs in other categories. Food prices, particularly for chocolate and meat, continued to rise. Furniture and household goods, such as fridge freezers and vacuum cleaners, also saw notable price increases.
While inflation appears to be trending downward, economists caution that the Bank of England is likely to remain cautious. Persistent services inflation and elevated wage growth mean rate cuts are unlikely until there is stronger evidence that inflation is firmly under control.
Markets are currently forecasting a possible rate cut in September, contingent on further improvements in wage data and inflation expectations.
For now, while the May figures point in a positive direction, the Bank is expected to maintain its cautious stance and keep borrowing costs unchanged.
