The data comes as policymakers continue to weigh persistent price pressures against signs of a weakening labour market. While recent developments in global energy markets have eased some immediate concerns, uncertainty over future inflation remains.
The Office for National Statistics reported that the Consumer Prices Index (CPI) rose by 2.8% in the 12 months to May, matching the annual rate recorded in April. Economists had expected inflation to edge up to 3%, reflecting concerns that the conflict involving Iran would feed through into consumer prices.
Food Prices Ease While Energy Remains a Source of Uncertainty
According to the Office for National Statistics, the unchanged inflation rate was largely explained by a slowdown in food price inflation, which fell from 3% in April to 2.2% in May. The rate of price increases for bread, meat, pasta and vegetables all declined compared with the previous year.
The Agriculture and Horticulture Development Board (AHDB) said British households are currently buying less beef because of affordability pressures. At the same time, fewer cattle are being slaughtered, although heavier carcasses have contributed to an oversupply. According to the Office for National Statistics, beef and veal prices were still 9.3% higher than a year earlier, although that increase was lower than the rises of up to 27% recorded in previous months.
The figures also reflect recent movements in household energy costs. A reduction in the government’s energy price cap between April and June lowered annual bills for a typical household by £117, contributing to weaker inflation in April. A higher price cap is expected to take effect from 1 July, reflecting increased wholesale energy costs.
The conflict in the Middle East had prompted expectations of stronger inflationary pressure through higher oil prices. Following the recent peace agreement between the United States and Iran, oil prices fell sharply, reducing expectations that inflation would rise as much as previously forecast. Analysts nevertheless warned that renewed disruption could reverse that trend.
Bank of England Balances Inflation against Slowing Economic Activity
The Bank of England continues to monitor inflation alongside wider economic conditions as it considers interest rate policy. Core inflation, which excludes more volatile items such as food and energy, rose from 2.5% in April to 2.6% in May, according to the Office for National Statistics.
Interest rates currently stand at 3.75% after six reductions since August 2024. The Bank is expected to leave rates unchanged at its latest meeting while assessing the effects of energy prices and broader inflationary pressures.
Labour market data presents a mixed picture. According to the Office for National Statistics, regular pay excluding bonuses increased by 3.4% between January and March 2026. After inflation is taken into account, regular wages rose by 0.1% over the same period.
Separate figures showed that job vacancies fell by 28,000 to 705,000 between February and April, while the unemployment rate increased to 5% in the three months to March. Early estimates also indicated that the number of payrolled employees fell by around 210,000 in April.
The Bank of England has previously stated that higher borrowing costs are intended to reduce spending and slow price increases, while also recognising that higher interest rates can weigh on households, businesses and economic growth.
