Petrol prices soared by nearly a quarter in the year to May – yet inflation unexpectedly held steady at 2.8%, as the cost of meat, dairy and vegetables rose at their slowest pace in 17 months, the Office for National Statistics said.
Economists had predicted inflation would climb to 3%, driven by the ongoing fallout from the war in the Middle East. But a peace deal between the US and Iran has raised hopes that further increases could be smaller, analysts said, even as transport costs hit their highest annual rate since December 2022.
“UK inflation stayed at 2.8% in May, defying forecasts of 3%, as slower food price rises offset a surge in petrol costs.”
Motor fuels were 24.6% higher than a year earlier, the ONS said, pushing overall transport inflation to 6.8%. Grant Fitzner, the ONS’s chief economist, said airfares, vehicle taxes and petrol prices all contributed to the upward pressure. However, he added, 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”.
Food inflation slowed from 3% in April to 2.2% in May – the weakest reading since December 2024. The rate at which beef and veal prices are rising has more than halved from 18.8% in March to 9.4% in May. The British Retail Consortium said the easing food inflation showed Britain’s supermarket sector was “highly competitive”, but warned that food inflation was likely to rise in the coming months.
The Food and Drink Federation echoed that caution. Its chief executive, Karen Betts, said: “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.” She pointed to the widespread use of long-term contracts for energy and ingredients as a reason for the delay.
Domestic heating oil – which, unlike energy bills, is not subject to a price cap – fell after rising sharply due to the war. But 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. 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”.