Inflation in the United Kingdom stayed at 2.8% in the year to May, with food price increases easing to a 17‑month low, according to the Office for National Statistics (ONS). The data show that transport costs rose at the fastest pace over the year to May, while price gains in meat, dairy and vegetables slowed compared with April.
Analysts had expected inflation to rise to around 3% in May and to stay elevated in the near term, given ongoing pressures from the war in the Middle East. However, some observers noted that a peace deal between the United States and Iran could limit further upward moves in the near term. ONS chief economist Grant Fitzner cited airfares, vehicle taxes and petrol prices as contributors to the May advance in inflation, with transport inflation at 6.8% on the year—the highest since December 2022—and motor fuels 24.6% higher than a year earlier.
Fitzner noted that the inflation rate was offset by lower food prices, pointing to declines in several food categories, including meat, dairy and vegetables, versus the previous month. Food inflation slowed to 2.2% in the year to May, the slowest since December 2024, after 3% in the year to April.
In response to the figures, the British Retail Consortium (BRC) highlighted that easing food inflation underscored competition in the grocery sector, though it warned that food inflation could rise again in the coming months. The Food and Drink Federation likewise cautioned that price increases had not yet fully reflected higher costs faced by farmers, processors and manufacturers, noting the typical delay from higher energy and input prices to retail prices.
Domestic heating oil, which is not subject to the same price cap as energy bills, also fell after a sharp rise tied to the war. Looking ahead, economists expect an impact on inflation when Ofgem’s energy price cap is set in July, with some caution that the lagged effects of higher oil prices could continue to feed through. Some observers warned that if risks such as a disruption in the Strait of Hormuz ease, inflationary pressures might moderate further, while others cautioned that any renewed tensions could push costs higher again.
Politically, Chancellor Rachel Reeves said the government was protecting households and businesses from rising costs through measures like energy bill support and freezes on fuel duty and rail fares. The Bank of England’s next rate decision was anticipated with expectations that the core rate would stay at 3.75%, as investors weigh whether inflation will ease steadily through late 2026 amid the evolving Middle East dynamics.
The outlook remains uncertain as energy markets and global supply chains adjust to the latest geopolitical developments, with investors watching for further data on price trends, consumer spending and the path of interest rates.
