This marked no change from the reading for April, which was down from 3.3% in the 12 months to March.
Core CPI – which excludes energy, food, alcohol and tobacco – was up by 2.6% in the 12 months to May, a rise from April’s figure of 2.5%.
Meanwhile, the CPI including owner-occupiers’ housing costs (CPIH) underwent a 3% increase – unchanged from the 12 months to April.
Inflation steadiness is ‘hugely welcome’
Last month’s unchanged inflation is positive news given the economic and geopolitical uncertainty that has been prevalent since the outbreak of the war in Iran. The figures may mean that the Bank of England Monetary Policy Committee’s (MPC’s) meeting about the base rate tomorrow could result in a hold.
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This sentiment is shared by John Phillips, CEO of Just Mortgages and Spicerhaart, who said: “Inflation data springs yet another surprise, remaining stable with lower food prices doing the heavy lifting to defy widespread expectations of an increase. This however is hugely welcome news – particularly ahead of the MPC decision tomorrow.
“Ahead of that decision, we do have news of supposed US-Iran peace deal, which is ready to be signed. While reports suggest it has more holes than a chocolate teapot, it is the positive progress that markets and economists have been waiting to see. In truth, oil prices have already reacted positively. While it may not be a magic cure for inflation, it does give rate setters the scope to be more measured in their approach to monetary policy moving forward. Even with this surprise from inflation, a hold is still the most likely outcome tomorrow. But this improving picture will hopefully alleviate any need for the multiple hikes as had been previously feared.
“As swap rates continue to stabilise and react favourably to this news, we absolutely need to be shouting about this to our clients. We have already been seeing movements from lenders across the market, proving that there is plenty of money out there and lenders ready and willing to lend. It’s up to us to be proactive, to really engage with our customer base and give them the guidance they need to navigate a changing market.”
