UK Inflation Holds Steady at 2.8% Despite Middle East Conflict
Quick Look
- UK inflation remained unexpectedly at 2.8% in May, defying economists' forecasts of a rise to 3%.
- The flatlining figure, following April's decline, comes despite the Middle East conflict driving up energy prices.
- The Bank of England is expected to hold interest rates steady.
AI-generated summary
Why It Matters
UK inflation remained at 2.8% in May, defying economists' expectations of a rise. This figure follows a decline in April, partly due to reduced domestic energy bills.
UK inflation unexpectedly remained at 2.8% last month despite the Middle East war driving up energy prices, official figures have shown.
May’s annual price rise reading recorded by the Office for National Statistics confounded economists’ forecasts of a rise to 3%.
The flatlining figure came after a decline in the consumer prices index to 2.8% in April, as cuts to domestic energy bills announced by Rachel Reeves at last year’s budget took effect.
The reading is still above the government’s 2% target for Bank of England policymakers, who are preparing to set interest rates on Thursday. They are widely expected to leave borrowing costs on hold at 3.75% for now, as they assess the impact of the conflict.
The closure of the strait of Hormuz to shipping has driven up oil prices over the past three months, with knock-on effects for the cost of fuel products, chemicals and fertiliser.
Economists hope the agreement reached between Donald Trump and the Iranian regime at the start of the week will reopen the maritime chokepoint in the coming weeks, helping to ease price pressures.
What to Watch
AI outlook — possibilities, not facts
Interest rates to remain at 3.75%
Very likely · Within days
Strait of Hormuz to reopen
Possible · Within weeks
Open Questions
- Will the agreement reopen the Strait of Hormuz?
- What will be the Bank of England's next move on interest rates?
