INFLATION remains unchanged at 2.8% in a “pleasant surprise” for the UK with experts saying it “may prompt the Bank of England to reduce its base rate in the coming months”.
The UK’s CPI (Consumer Price Index) remains at 2.8% in the year to May despite being expected to rise by at least 3%, the latest figures from the Office for National Statistics (ONS) show.
Transport made the largest upward contribution to the monthly change in both CPIH (Consumer Price Index including housing costs) and CPI annual rates – food and non-alcoholic beverages made the largest, partially offsetting, downward contribution.
Core CPIH (CPIH excluding energy, food, alcohol and tobacco) rose by 2.8% in the 12 months to May 2026, unchanged from the 12 months to April – while the CPIH goods annual rate slowed from 2.4% to 2%, and the CPIH services annual rate rose from 3.4% to 3.6%.
Core CPI (CPI excluding energy, food, alcohol and tobacco) rose by 2.6% in the 12 months to May 2026, up from 2.5% in the 12 months to April – while the CPI goods annual rate slowed from 2.4% to 2%, and the CPI services annual rate rose from 3.2% to 3.7%.
This comes ahead of the Bank of England’s base rate decision tomorrow when it’s expected to be held at 3.75%. Though experts expect it to be reduced in the coming months if inflation remains below 3%.
It may prompt the Bank of England to reduce its base rate in the coming months
Grant Fitzner, Chief Economist at ONS, said: “After last month’s slowdown, inflation held steady in May as various price movements offset each other. The main upward movement came from transport with airfares, vehicle taxes and petrol prices all pushing up inflation.
“These were offset by lower food prices, with decreases in inflation seen across a range of meat, dairy and vegetable items compared to last month, as well as the cost of domestic heating oil, which fell back after climbing in recent months.
“The annual cost of raw materials continued to increase, led by rises in the cost of chemicals, while the increase in the costs of goods leaving factories slowed, partly due to a drop in the cost of domestically produced cars.”
Chris Barry, Director at London-based Thomas Legal, said the Bank of England could reduce its base rate if inflation stays below 3%.
He added: “The difference between CPI and CPIH is striking and this is down to a slowing housing market with much smaller price rises. Equivalent rental values associated with the housing calculation of inflation have often been rising significantly but have slowed lately due to a reduction in buyers.
“Overall inflation remaining steady below 3% may prompt the Bank of England to reduce its base rate in the coming months if growth remains low and the economy looks set to contract.”
This is a pleasant surprise and welcome news for the UK
Rohit Kohli, Director at Romsey-based The Mortgage Stop, said he was surprised by the no change in inflation in May.
He added: “This is a pleasant surprise and welcome news for the UK. Many expected inflation to edge up, so holding at 2.8% gives the market some breathing space. The key point is that price pressures are mixed. Transport pushed inflation higher, but food and non-alcoholic drinks helped offset that.
“Services inflation is still sticky, so this is not a clean win, but it is better than feared. For mortgage borrowers, this keeps things steady for now. It suggests the Bank of England is less likely to be forced into a tougher position to combat inflation, but it is probably still too early for cuts.
“I would not expect sharp rate reductions from lenders, but the gradual downward tweaks we have seen recently may continue if nothing unexpected knocks confidence.”
Anita Wright, Chartered Financial Planner at Ribble Wealth Management, is suspicious of the figures.
She claimed: “The gap between the headline figure and what people actually feel at the till keeps widening. The basket gets re-weighted, the methodology shifts, and the number that lands is the one that suits the narrative, not the one that matches your shopping receipt or your energy bill.
“Official CPI is deliberately understated, smoothed by substitution effects and hedonic adjustments that strip out the real loss of purchasing power. The true rate of price rises sits well north of the published 2.8%.”
