Stay informed with free updates
Simply sign up to the UK inflation myFT Digest — delivered directly to your inbox.
UK inflation was 3.4 per cent in May, in an indication that persistent price pressures have yet to recede as the Bank of England meets this week to set interest rates.
Wednesday’s reading from the Office for National Statistics matched forecasts in a Reuters poll of analysts and marked a decline from April’s 3.5 per cent figure.
The ONS has since said April’s inflation reading was overstated by around 0.1 percentage point because of an error in car taxes. It has used correct figures in May’s reading. Declines in air fares and fuel also weighed on May’s rate, according to the ONS.
The inflation figure comes a day before the BoE is expected to keep its key rate unchanged. The Monetary Policy Committee has cut interest rates four times since last summer as it grapples with lacklustre growth and persistent price pressures.
Last month the MPC lowered borrowing costs by a quarter point to 4.25 per cent, but minutes from the meeting revealed sharp divisions among the nine policymakers over the threat from inflation.
Ruth Gregory at Capital Economics said: “May’s figures were in line with the Bank’s expectations, so today’s release is unlikely to move the needle much for the Bank.”
Traders expect the central bank to deliver two more quarter-point cuts this year, with the next move coming in September, according to levels implied by the swaps market
Following the figures, the pound edged up 0.3 per cent higher to $1.346.
Services inflation, a key measure of underlying price pressures rate-setters, slowed to 4.7 per cent in May, from 5.4 per cent in April, according to the ONS.
Responding to May’s data, chancellor Rachel Reeves said: “We took the necessary choices to stabilise the public finances and get inflation under control after the double-digit increases we saw under the previous government, but we know there’s more to do.”