Consumer Prices Index Inflation Unchanged at 8.7% in May
Key Highlights :
The rate of Consumer Prices Index (CPI) inflation remained unchanged at 8.7% in May, according to the Office for National Statistics (ONS). Despite predictions that the figure would fall slightly, the news is likely to increase fears that the Bank of England will increase interest rates again on Thursday as it seeks to reduce inflation.
The ONS said that rising prices for plane tickets, recreational and cultural goods and services, and second-hand cars were the main contributors to inflation, while motor fuel prices fell, putting downward pressure on inflation. ONS Chief Economist Grant Fitzner commented: “After last month's fall, annual inflation was little changed in May and remains at a historically high level. The cost of air fares rose by more than a year ago and is at a higher level than usual for May. Rising prices for second-hand cars, live music events and computer games also contributed to inflation remaining high.”
Chancellor Jeremy Hunt said that the government is committed to halving the rate of inflation this year, and that it will “not hesitate in our resolve to support the Bank of England as it seeks to squeeze inflation out of our economy while also providing targeted support with the cost of living.” Shadow Chancellor Rachel Reeves added that “simply continuing on this Tory path of managed decline is not the summit of Labour's ambition. We need a more secure economy, more secure family finances and a plan to help us grab hold of the opportunities before us. With a relentless focus on the cost of living, our strong fiscal rules and our mission for growth, that is what a Labour government will bring.”
Liberal Democrat Treasury spokeswoman Sarah Olney accused the Chancellor of sitting on his hands while inflation drives up interest rates, hitting mortgage holders. In response to the inflation data, she said: “These worse-than-expected figures show the Government is failing miserably to bring inflation down and provide relief for struggling families facing soaring bills. Homeowners now face the likelihood of even more interest rate hikes adding to their monthly mortgage payments all while the Chancellor just sits on his hands.”
CBI Lead Economist Alpesh Paleja said that “many will have to keep tightening their belts for some time” due to high food price inflation, and that another interest rate rise from the Bank of England “looks like a done deal”, with the possibility of a further increase in August. He added: “The absence of movement in CPI inflation underscores the persistent nature of current cost and price pressures, with households and businesses left feeling the pinch. In particular, the ongoing strength in food price inflation means that many will have to keep tightening their belts for some time.”
The news that the rate of Consumer Prices Index inflation remained unchanged at 8.7% in May has caused concern among borrowers, as it increases the likelihood of further interest rate rises. The ONS said that rising prices for plane tickets, recreational and cultural goods and services, and second-hand cars were the main contributors to inflation, while motor fuel prices fell, putting downward pressure on inflation. The government is committed to halving the rate of inflation this year, but Liberal Democrat Treasury spokeswoman Sarah Olney has accused the Chancellor of sitting on his hands while inflation drives up interest rates, hitting mortgage holders. CBI Lead Economist Alpesh Paleja said that another interest rate rise from the Bank of England “looks like a done deal”, with the possibility of a further increase in August. With households and businesses feeling the pinch, it is clear that the government must take action to reduce inflation and provide relief to struggling families.
