Key facts
- UK inflation held steady at 2.8% in May, unchanged from April's 13-month low.
- Economists had forecast inflation to rise to 3.0% for May.
- Services price inflation increased to 3.7% in May from 3.2% in April.
- Core inflation rose to 2.6% in May from 2.5% in April.
British inflation unexpectedly held at 2.8% for May, unchanged from the 13-month low reached in April, official figures from the Office for National Statistics showed. This figure defied economists' forecasts, who had predicted a rise to 3.0%.
Services price inflation, a key indicator for underlying price pressures monitored by the Bank of England, increased to 3.7% in May from 3.2% in April, aligning with economists' expectations. Core inflation, which excludes volatile food, energy, alcohol, and tobacco prices, also saw a slight increase to 2.6% from 2.5%.
The Bank of England is widely expected to maintain its base interest rate at 3.75% ahead of its upcoming policy announcement. Governor Andrew Bailey has suggested the BoE has room to assess the impact of recent geopolitical events on inflation. However, some policymakers are concerned about the potential for broader price increases and a decline in household confidence in the central bank's inflation target.
Financial markets have found some reassurance in an apparent agreement between the U.S. and Iran that could lead to the reopening of the Strait of Hormuz, a critical oil export route. Britain has been particularly vulnerable to the conflict's impact due to its reliance on imported natural gas.