Inflation remained stubbornly at 2.8% in the year to May, defying expectations of a rise to 3%, as the pace of food price increases slowed to a 17-month low, the Office for National Statistics (ONS) said.
Experts had widely predicted a steady climb in the cost of goods and services over the coming months, driven by the ongoing impact of the war in the Middle East. But a peace deal agreed between the US and Iran means further increases could be smaller, according to analysts.
“UK inflation held at 2.8% in May, defying forecasts of a rise, as slower food price rises offset surging petrol costs.”
Transport costs rose by the fastest annual rate — 6.8%, the highest since December 2022 — propelled by motor fuels, which were 24.6% higher than a year earlier. Airfares and vehicle taxes also added upward pressure, said Grant Fitzner, the ONS's chief economist.
However, 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," Fitzner said. Food inflation fell from 3% in April to 2.2% in May — the slowest rate since December 2024. The price of beef and veal, while still high, rose 9.4% in the year to May, down from 13.2% in April and 18.8% in March.
The British Retail Consortium (BRC) said easing food inflation showed the British 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, with chief executive Karen Betts noting 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 added, partly because of "the widespread use of long-term contracts for energy and ingredients."
Domestic heating oil, which unlike energy bills is not subject to 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, warned of 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."