Inflation in the UK defied expectations in May, holding steady at 2.8% as a sharp slowdown in food price rises offset the highest transport cost inflation since December 2022, according to the Office for National Statistics.
Analysts had widely predicted the rate would climb to 3%, with the ongoing impact of the war in the Middle East expected to push prices higher. But a peace deal agreed between the US and Iran means further increases could be smaller, analysts said.
“UK inflation unexpectedly held at 2.8% in May as food price rises slowed to a 17-month low.”
Grant Fitzner, the ONS's chief economist, said airfares, vehicle taxes and petrol prices all pushed up inflation. Motor fuels were 24.6% higher in May than the same month last year, driving overall transport inflation to 6.8% — the highest annual rate since December 2022.
However, that was "offset by lower food prices, with decreases in inflation seen across a range of meat, dairy and vegetable items compared to this month", Fitzner said. Food inflation fell from 3% in April to 2.2% in May, the slowest rate since December 2024.
Beef and veal prices, while still high, rose by 9.4% in the year to May, compared with 13.2% in April and 18.8% in March — a clear sign that the pace of increase is easing.
The British Retail Consortium said easing food inflation showed that the British supermarket sector was highly competitive, but warned that food inflation was likely to rise in the coming months. Similarly, the Food and Drink Federation said prices "still don't reflect the inflation caused by the closure of the Strait of Hormuz". Chief executive Karen Betts explained: "It generally takes several months for the increased costs paid by farmers, processors and manufacturers to filter into raised prices at the tills" — partly because of "the widespread use of long-term contracts for energy and ingredients".
Domestic heating oil, which unlike energy bills does not have a price cap, fell after rising sharply due to the war.
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".