United Kingdom: Inflation unchanged in May

Consumer prices rose 0.4% in May over the previous month, matching April’s figure. May’s reading was driven in part by higher prices for transport, furniture, household equipment and maintenance and alcoholic beverages and tobacco.

Inflation was unchanged at 2.4% in May, the joint-lowest level in over a year and once more surprising analysts, who had expected an uptick to 2.5% on the back of higher fuel prices. As a result, inflation remained above the BoE’s 2.0% target. Meanwhile, annual average inflation remained steady from a month earlier at 2.8%.

UK Inflation Forecast

Looking ahead, inflation could tick up slightly in the near term as higher energy prices continue to pass through, although it will likely soon continue its downward trend. The Bank of England downgraded its inflation forecasts in May’s Inflation Report, and now sees inflation dipping to 2.2% in Q4 2018 and 2.1% in Q4 2019, from 2.4% and 2.2% respectively in February’s Report. FocusEconomics Consensus Forecast panelists expect inflation to average 2.5% in 2018 and 2.1% in 2019.