UK inflation slows in May but food prices jump
British inflation slowed as expected in May, pulled down by air fares that leapt in April and the correction of a tax data error, although food prices shot up at the fastest rate in more than a year.
Consumer prices rose in annual terms by 3.4 per cent in May, the Office for National Statistics said on Wednesday, just as a Reuters poll of economists and the Bank of England had predicted.
Services price inflation - a crucial metric for the BoE - cooled to 4.7 per cent from 5.4 per cent in April, matching the BoE's forecast for May. The Reuters poll had pointed to a reading of 4.8 per cent.
Earlier in June, the ONS said April's headline consumer price inflation reading of 3.5 per cent had been overstated by 0.1 percentage points due to an error in car tax data from the government.
April's figures were not amended, but the correct data was used for May's readings.
Air fares fell sharply after an Easter holiday spike in April's readings.
The data is unlikely to shift interest rate expectations among economists and investors who think the BoE will leave borrowing costs on hold when it announces its June policy decision on Thursday.
Sterling rose slightly against the US dollar after the ONS data release.
Gas, electricity and water prices rose in April alongside higher taxes on employers, causing inflation to leap from 2.6 per cent in March.
A rise in oil prices since the start of the Iran-Israel conflict last week could cause inflation to rise again.
Food prices rose by 4.4 per cent in the 12 months to May, the biggest increase in more than a year, the ONS said, a blow for low-income households.
Some BoE officials have said they disagree with the central bank's key assumption reached at its May meeting that the recent climb in inflation would not have longer-running effects on pricing behaviour.
Market pricing on Tuesday pointed to an 87 per cent chance the BoE will leave rates on hold this week, with two 0.25 percentage-point cuts priced in by the 2025's end.
The BoE lowered rates by a quarter-point to 4.25 per cent on May 8.
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Ukrainian President Volodymyr Zelenskiy will leave the G7 summit with new aid from host Canada for its war against invader Russia but without a joint statement of support from members or a chance to meet with US President Donald Trump. The G7 wealthy nations struggled to find unity over the conflict in Ukraine after Trump expressed support for Russian President Vladimir Putin and left a day early to address the Israel-Iran conflict from Washington. Canada dropped plans for the G7 to issue a strong statement on the war in Ukraine after resistance from the United States, a Canadian official told reporters. Canadian Prime Minister Mark Carney said Ottawa would provide C$US2 billion ($1.47 billion) in new military assistance for Kyiv as well as impose new financial sanctions. 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Other leaders do not need to sign off on G7 chair statements. A European official said leaders had stressed to Trump their plans to be hard on Russia and Trump seemed impressed, though he does not like sanctions in principle. Three European diplomats said they had heard signals from Trump that he wanted to raise pressure on Putin and consider a US Senate bill drafted by Senator Lindsey Graham, but that he had not committed to anything. "I am returning to Germany with cautious optimism that decisions will also be made in America in the coming days to impose further sanctions against Russia," German Chancellor Friedrich Merz said. G7 leaders agreed on six statements, about migrant smuggling, artificial intelligence, critical minerals, wildfires, transnational repression and quantum computing. Trump said on Monday he needed to be back in Washington as soon as possible due to the situation in the Middle East, where escalating attacks between Iran and Israel have raised risks of a broader regional conflict. He later said his early departure from the summit had "nothing to do with" working on a ceasefire between Israel and Iran, however, denying comments by French President Emmanuel Macron, who had said the US president leaving could be a sign of a potential deal. A White House official on Tuesday said Trump explained that he returned to the US because it is better to hold high-level National Security Council meetings in person, rather than over the phone. Trump did agree to a group statement published on Monday calling for a resolution of the Israel-Iran conflict. The statement said Iran is the principal source of regional instability and terror and that Israel has the right to defend itself. Ukrainian President Volodymyr Zelenskiy will leave the G7 summit with new aid from host Canada for its war against invader Russia but without a joint statement of support from members or a chance to meet with US President Donald Trump. The G7 wealthy nations struggled to find unity over the conflict in Ukraine after Trump expressed support for Russian President Vladimir Putin and left a day early to address the Israel-Iran conflict from Washington. Canada dropped plans for the G7 to issue a strong statement on the war in Ukraine after resistance from the United States, a Canadian official told reporters. Canadian Prime Minister Mark Carney said Ottawa would provide C$US2 billion ($1.47 billion) in new military assistance for Kyiv as well as impose new financial sanctions. Carney said when G7 leaders met for dinner in the Rocky Mountain resort area of Kananaskis on Monday before Trump left, they stressed the importance of using "maximum pressure against Russia" to force it to start serious peace talks. "Even if the American President is not putting enough pressure on Russia right now, the truth is that America still has the broadest global interests and the largest number of allies. All of them will need strong protection," he said in a post on his Telegram account. Although Canada is one of Ukraine's most vocal defenders, its ability to help Kyiv is far outweighed by the US, the largest arms supplier. Zelenskiy had said he hoped to talk to Trump about acquiring more weapons. When the summit ends, Carney plans to issue a chair statement calling for more pressure on Russia through sanctions and saying the G7 backs US-led peace efforts, two G7 sources said. Canada holds the rotating G7 presidency this year. Other leaders do not need to sign off on G7 chair statements. A European official said leaders had stressed to Trump their plans to be hard on Russia and Trump seemed impressed, though he does not like sanctions in principle. Three European diplomats said they had heard signals from Trump that he wanted to raise pressure on Putin and consider a US Senate bill drafted by Senator Lindsey Graham, but that he had not committed to anything. "I am returning to Germany with cautious optimism that decisions will also be made in America in the coming days to impose further sanctions against Russia," German Chancellor Friedrich Merz said. G7 leaders agreed on six statements, about migrant smuggling, artificial intelligence, critical minerals, wildfires, transnational repression and quantum computing. Trump said on Monday he needed to be back in Washington as soon as possible due to the situation in the Middle East, where escalating attacks between Iran and Israel have raised risks of a broader regional conflict. He later said his early departure from the summit had "nothing to do with" working on a ceasefire between Israel and Iran, however, denying comments by French President Emmanuel Macron, who had said the US president leaving could be a sign of a potential deal. A White House official on Tuesday said Trump explained that he returned to the US because it is better to hold high-level National Security Council meetings in person, rather than over the phone. Trump did agree to a group statement published on Monday calling for a resolution of the Israel-Iran conflict. The statement said Iran is the principal source of regional instability and terror and that Israel has the right to defend itself.
