The United Kingdom’s yearly inflation rate was 3.4% in May, the same level hit in April. This information, published by the Office for National Statistics (ONS) on Wednesday, is in line with what was forecasted by analysts. What this means for inflation First, it’s a confirmation that inflation is settling down. Core inflation, which excludes volatile categories such as energy, food, alcohol, and tobacco, ticked up to 3.5% YoY.
With the core inflation rate at 3.8% in April, that reflects a marginal cut in inflation for the month of May. Even with this substantial decline, the nation’s central bank continues to eye inflationary forces that could threaten economic recovery and stability. Sources pic Economists forecast a 25-bps worth of cuts in BoE interest rates. Whether the Board will approve this action at their next scheduled meeting in August.
Today’s inflation report continues the pattern of increasing consumer prices that we’ve witnessed over the past several months. Rising energy and shelter costs have played a major role in bringing the inflation rate we saw in April and May. The ONS data serves as a reminder that persistent inflation remains a huge challenge for consumers and policymakers still today.
With the big central bank nearing its next scheduled decision on Thursday, it looks likely to keep rates steady right where they are. So although inflation figures are stabilizing, they are still high. Such a short time frame will almost surely force policymakers to make high-profile decisions about what major changes to make.