Additionally, in May, consumer prices increased by 0.3% month-on-month, following a 0.3% increase in April. Economists expected consumer prices to rise 0.4%.
According to Office for National Statisticsseveral key trends emerged:
The Consumer Price Index, including the cost of housing for owner occupiers (CPIH), increased by 2.8% over the 12 months to May (April: +3.0%).
- Food prices contributed the most to the decline.
- The annual inflation rate for food and non-alcoholic beverages decreased from 2.9% to 1.7%.
- The largest contribution to the increase came from automotive fuels.
- Transport prices are up 0.3% compared to May 2023 (April: -0.1%).
- Core CPI (excluding energy, food, alcohol and tobacco) increased by 4.2% over 12 months to May 2024 (April: 4.4%).
- The annual rate for CPIH services increased from 6.0% to 5.9% in May.
Bank of England interest rate developments
Looking ahead, the Bank of England will announce its June interest rate decision on Thursday June 20. While economists expect the BoE to keep interest rates at 5.25%, the latest inflation figures could play a central role in influencing the BoE’s vote and subsequent guidance. .
Additionally, the May inflation report could fuel investors’ bets on an interest rate cut in August. The BoE will hold a press conference following the August announcement, allowing BoE Governor Andrew Bailey to outline the reasons for an interest rate cut.
GBP/USD reaction to UK May inflation report
Ahead of the release of the UK inflation report, GBP/USD fell to a low of $1.26908 before rising to a high of $1.27134.
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