LONDON — In May, inflation levels in the United Kingdom saw a slight decline, primarily driven by a decrease in airfares and transportation expenses, while food prices, notably chocolate, experienced significant growth, as reported by official figures on Wednesday.
The Office for National Statistics indicated that consumer prices rose by 3.4% over the year ending in May, a slight drop from the 3.5% recorded in the preceding month.
Despite this decline, inflation continues to exceed the Bank of England’s target rate of 2%. The bank is set to announce its new interest rate decision on Thursday, with the Monetary Policy Committee, comprising nine members, largely anticipated to maintain the primary interest rate at 4.25%. This committee has consistently lowered borrowing rates on a quarterly basis since August of the previous year.
However, the reduction in inflation was not as significant as projected. Analysts had predicted the rate to decrease to 3.3% for May, driven by cooling price rises and following numerous bill increases the month before, which propelled inflation to its highest in over a year.
The unexpected outcome was majorly due to a 4.4% increase in prices for food and non-alcoholic beverages. Items like sugar, jam, chocolate, and ice cream saw considerable monthly price hikes, and there was also a rise in meat prices.
Economists, including those at the Bank of England, anticipate that inflation will continue to remain above the targeted rate throughout the remainder of the year. The unpredictability surrounding U.S. President Donald Trump’s tariff policies and the instability in the Middle East contribute to the challenges in predicting economic progress and future interest rate adjustments.
Felix Feather, an economist at the asset management firm Aberdeen, stated, “We maintain our prediction that the Bank of England will persist in reducing rates on a quarterly basis.” However, the uncertainties and risks from U.S. trade policies present both positive and negative implications for this forecast.