Financial News: UK Inflation Unchanged At 2.8% Ahead Of BoE

UK Inflation Unchanged At 2.8% Ahead Of BoE Decision

(RTTNews) - Despite transport cost pressures, UK consumer price inflation remained stable in May, ahead of the Bank of England's policy announcement on Thursday.

Consumer prices registered an annual increase of 2.8 percent, the same rate as seen in April, the Office for National Statistics said Wednesday. Prices were expected to climb 3.0 percent.

Meanwhile, core inflation rose to 2.6 percent from 2.5 percent in the previous month. Nonetheless, the rate was slightly below forecast of 2.7 percent.

The ONS said transport costs made the largest upward contribution to inflation, surging 6.8 percent, the strongest since December 2022. Conversely, food and non-alcoholic beverages provided the downward pressure on inflation.

Services inflation advanced to 3.6 percent from 3.4 percent, while growth in goods prices eased to 2.0 percent from 2.4 percent.

On a monthly basis, consumer prices rose 0.2 percent in May, slower than the 0.7 percent increase in April.

The Bank of England is set to announce its policy decision on June 18. Markets expect the BoE to hold the rate at 3.75 percent, the lowest since June 2023. Previously, the bank had reduced the rate by 25 basis points each in August and November 2025.

ING economist James Smith said inflation is expected to peak around 3.5 percent in September based on current energy prices. That is unlikely to justify a rate hike from the BoE, said Smith.

Smith forecasts a 7-2 vote in favor of 'no change' tomorrow - and a return to rate cuts in 2027.

Today's CPI data is likely to be the calm before the storm, with price pressures set to see a pronounced increase over the coming months, Confederation of British Industry Deputy Chief Economist Alpesh Paleja said.

"While the Bank of England is expected to hold interest rates tomorrow, uncertainty remains over how it will respond, later this year, if inflationary pressures persist," British Chambers of Commerce Research & Economics Analyst Caterina Batog said.

Factory gate inflation slowed marginally to 4.0 percent in May from 4.1 percent a month ago, the ONS said in a separate communiqué.

On the other hand, input price inflation accelerated to the highest since February 2023. Input prices grew 8.7 percent after rising 7.9 percent in April.

On a monthly basis, output prices climbed 0.5 percent, slower than the 1.5 percent rise in April. At the same time, input prices gained only 0.2 percent, following April's 2.6 percent increase.

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