British inflation remained unchanged in May, according to official data released on Wednesday, providing a closely watched update for policymakers and investors ahead of the Bank of England’s latest interest rate decision.
The Consumer Prices Index rose by 2.8% in the 12 months to May 2026, matching the annual rate recorded in April.
On a monthly basis, CPI increased by 0.2% in May, the same pace seen in May 2025.
The broader Consumer Prices Index, including owner-occupiers’ housing costs, also remained unchanged at 3.0% in the 12 months to May.
Monthly CPIH growth stood at 0.2%, unchanged from the same month a year earlier.
Inflation defies expectations
The inflation reading came in below economists’ expectations.
Economists polled by Reuters had forecast that CPI inflation would rise to 3.0% in May.
Instead, inflation held at the 13-month low reached in April.
Following the release of the data, sterling weakened slightly as markets digested the lower-than-expected inflation figure.
The latest figures arrive just one day before the Bank of England announces its next monetary policy decision.
Transport costs drive inflation higher
According to the official data, transport made the largest upward contribution to the monthly change in both CPIH and CPI annual inflation rates.
However, the increase was partially offset by lower inflation in food and non-alcoholic beverages, which made the largest downward contribution to annual price growth.
The data suggest that while some areas of the economy continue to experience price pressures, easing food costs helped prevent a broader acceleration in inflation during the month.
Mixed signals from core inflation measures
Underlying inflation indicators presented a mixed picture.
Core CPIH, which excludes energy, food, alcohol, and tobacco, increased by 2.8% in the 12 months to May, unchanged from April.
Within this measure, the annual inflation rate for goods slowed to 2.0% from 2.4%, while services inflation rose to 3.6% from 3.4%.
Meanwhile, Core CPI rose to 2.6% in May from 2.5% in April.
The increase was slightly smaller than economists had anticipated.
The annual inflation rate for CPI goods slowed to 2.0% from 2.4%, while CPI services inflation accelerated sharply to 3.7% from 3.2%.
The Bank of England closely monitors services inflation as an indicator of underlying domestic price pressures.
Focus on future inflation risks
Inflation has remained above the Bank of England’s 2% target for most of the past five years.
In April, the central bank said inflation was likely to rise above 3.5% by the end of 2026 and could potentially exceed 6% in an adverse scenario.
Economists cited the impact of the US-Iran conflict as one factor keeping British inflation higher than the BoE had projected in January.
Britain has been particularly exposed because it relies on imported natural gas.
However, financial markets have recently taken comfort from signs of an agreement between the United States and Iran that could reopen the Strait of Hormuz, a key route for global oil exports.
The agreement is reportedly expected to be signed in Switzerland on Friday.
While BoE Governor Andrew Bailey has indicated that policymakers have time to assess the economic effects of the conflict, some MPC members remain concerned that businesses could pass higher costs on to consumers more broadly or that the situation could weaken public confidence in the central bank’s ability to control inflation.
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