The U.K. inflation rate held at 2.8% in May, contrary to economists' expectations of a rise to 3%. This stability follows a previous drop attributed to changes in the regulated energy price cap, which is expected to increase by 13% soon, potentially impacting consumer costs.
The Office for National Statistics highlighted that transportation costs were the main driver of inflation, with air fares rising 10.3% month-on-month, influenced by the timing of the Easter holiday. In contrast, food and non-alcoholic drink prices saw a decline. Gasoline prices also increased slightly, reaching their highest levels since November 2022.
The Bank of England's Monetary Policy Committee recently maintained the key interest rate at 3.75%, indicating that external factors, such as geopolitical tensions affecting energy prices, limit the effectiveness of monetary policy. Market expectations suggest a 95% probability that the Bank will keep rates steady in its upcoming meeting, but a rate hike is anticipated by the end of the year