We analyse what the data's telling us about inflation and the Bank of England's decision to raise interest rates again.
CPI inflation confounded expectations in May, staying unchanged (at 8.7%), instead of continuing to fall as most analysts had predicted (to around 8.4%). The latest data has reinforced concerns that the UK’s inflation problem may prove more difficult to shift than previously expected.
On the plus side, the data showed signs of more globally-centric price pressures receding: food price inflation softened (but was still very high, at 18.3%) and fuel prices fell by 13% on a year ago – the largest decline since the height of the first COVID lockdown in June 2020. Encouragingly, there were also signs of pipeline price pressures receding, with manufacturing input prices falling in annual terms, for the first time in two-and-a-half years.
However, the data also stoked concerns around the persistence of inflation. The drags from food and fuel prices were offset by a broad range of price rises elsewhere – such that “cor
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