Inflation remained stubbornly at 2.8% in the year to May, defying expectations of a rise to 3%, as a slowdown in food price rises offset surging petrol costs. The Office for National Statistics (ONS) reported that transport costs — led by motor fuels, which were 24.6% higher than a year ago — rose at the fastest annual rate since December 2022, hitting 6.8%. But the pace of increases in meat, dairy and vegetables eased, dragging overall food inflation down from 3% in April to 2.2% in May, the slowest rate since December 2024.
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, for instance, rose 9.4% in the year to May, down from 13.2% in April and 18.8% in March.
“Inflation unexpectedly held at 2.8% in May as slowing food price rises offset surging petrol costs.”
The unexpected flat reading came as analysts had widely predicted a steady increase in inflation over coming months due to the ongoing impact of the war in the Middle East. However, the peace deal agreed between the US and Iran means further increases could be smaller, according to analysts.
Responding to the figures, the British Retail Consortium (BRC) said 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: "It generally takes several months for the increased costs paid by farmers, processors and manufacturers to filter into raised prices at the tills." She added that prices still don't reflect the inflation caused by the closure of the Strait of Hormuz, partly because of "the widespread use of long-term contracts for energy and ingredients".
Domestic heating oil — which does not have a price cap like energy bills — fell after rising sharply due to the war. But Charlotte O'Leary, associate economist at the National Institute of Economic and Social Research, warned of a "sizeable" upward impact on inflation when Ofgem sets its energy price cap in July, noting that "the lagged effects of higher oil prices are still feeding through." She also cautioned 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."