The UK inflation rate remained high in May, as consumer prices rose by an annual 8.7%, unchanged from the previous month, according to the Office for National Statistics (ONS).
On a monthly basis, headline CPI increased by 0.7%, while core inflation — which excludes volatile energy, food, alcohol and tobacco prices — gained by an annual 7.1%, up from 6.8% in April and the highest rate since March 1992.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH), the ONS’ preferred metric, rose by 7.9% in the 12 months to May 2023, up from 7.8% in April.
Inflation dipped below 10% in April but continues to exceed consensus forecasts and remains significantly higher than the Bank of England’s 2% target.
The main drivers of inflation in May were higher food, transport and energy prices, which were partly offset by lower clothing and footwear prices. The cost of bread, cereal and chocolate rose sharply, as well as petrol, diesel and electricity. The ONS said these price increases reflected global supply and demand pressures, as well as the impact of the COVID-19 pandemic on production and consumption patterns.
The ONS also noted that some of the inflationary pressure came from the comparison with low prices a year ago, when the UK was under lockdown and many businesses were closed or offering discounts.
The high inflation rate has raised expectations that the Bank of England will raise interest rates sooner than previously anticipated, to curb price growth and protect the value of money. The Bank has said it may have to raise interest rates in the “coming months” if inflation does not moderate as expected.
However, some economists have argued that the current spike in inflation is temporary and will ease as supply bottlenecks are resolved and demand normalises. They have also warned that raising interest rates too soon could harm the economic recovery and hurt borrowers and businesses.
The UK is not alone in facing high inflation, as many other countries are also experiencing rising prices due to similar factors. The annual inflation rate for countries which use the euro was estimated to be 6.4% in May1, while the US reported a 9.6% increase in consumer prices in April2, the highest since 2008.
The ONS will publish the next inflation figures for June on July 14.
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