United Kingdom Inflation

United Kingdom

Inflation stabilizes in May

In May, consumer prices added 0.2% over the previous month, which came in well below the 1.0% price rise observed in April. The subdued monthly price increase reflected higher food prices (+0.2% month-on-month), which were offset by falling prices in the transport category (-0.1% mom), as air fares placed downward pressure on CPI inflation. As a result, annual inflation stabilized in May and remained unchanged from April's 4.5%, which was in line with market expectations. Although upside risks to inflation remain, while economic growth is weak, the Bank of England is unlikely to raise interest rates in order to bring inflation down to its target level of 2.0%. According to its Inflation Report from May, the Bank of England projects inflation to average 4.7% this year and to moderate to 3.0% in 2012.


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