Inflation in the UK defied expectations in May, holding at 2.8% as a slowdown in food price rises offset a surge in petrol costs that pushed transport inflation to its highest level in more than two years.
Experts had widely predicted the rate would climb to 3% in May, with many warning of a steady increase in the months ahead because of the ongoing war in the Middle East. But a peace deal between the US and Iran has tempered those forecasts, with analysts now suggesting further rises could be smaller than previously feared.
“UK inflation unexpectedly held at 2.8% in May, as slower food price rises offset a surge in petrol costs.”
According to the Office for National Statistics (ONS), transport costs rose by the fastest rate of any category over the year to May. Motor fuels were 24.6% higher than the same month last year, pushing overall transport inflation to 6.8% — the highest annual rate since December 2022.
Yet the impact of that surge was softened by a continued easing in food prices. The pace of food price rises slowed to a 17-month low, with annual food inflation falling from 3% in April to 2.2% in May — the slowest rate since December 2024. Meat, dairy and vegetable items all saw decreases in inflation compared with the previous month, the ONS said.
Grant Fitzner, the ONS's chief economist, said airfares, vehicle taxes and petrol prices all pushed up inflation, but that was “offset by lower food prices, with decreases in inflation seen across a range of meat, dairy and vegetable items compared to last month.”
Beef and veal, while still expensive, recorded a sharp slowdown: prices rose 9.4% in the year to May, down from 13.2% in the year to April and 18.8% in the year to March.
The British Retail Consortium said the easing food inflation showed the British supermarket sector was highly competitive, but warned food inflation was likely to rise in the coming months. The Food and Drink Federation echoed that caution, with chief executive Karen Betts explaining that prices “still don't reflect the inflation caused by the closure of the Strait of Hormuz.”
“It generally takes several months for the increased costs paid by farmers, processors and manufacturers to filter into raised prices at the tills,” Betts said, partly because of “the widespread use of long-term contracts for energy and ingredients.”
Domestic heating oil — which, unlike energy bills, has no price cap — fell after rising sharply due to the war, providing some relief to households.
Charlotte O'Leary, associate economist at the National Institute of Economic and Social Research, said there is expected to be a “sizeable” upward impact on inflation when Ofgem sets its energy price cap in July. “The lagged effects of higher oil prices are still feeding through,” she said, adding that “should the [US-Iran] deal collapse, oil may rebound and reinstate upward pressure on inflation.”
Chancellor Rachel Reeves said the government was “protecting families and businesses from rising costs, with cuts in energy bills and freezes in fuel duty and rail fares.”