UK inflation rate at 3.4% in May

The annual inflation rate in the UK edged down to 3.4% in May 2025 from 3.5% in April, precisely matching market expectations. This slight moderation in price increases was primarily driven by a significant downward contribution from transport prices, which saw a notable shift from a 3.3% increase to a mere 0.7% rise.

This improvement in transport costs largely reflected a 5% fall in airfares, an effect attributed to the timing of Easter and associated school holidays, which typically influence travel demand. Additionally, falling motor fuel prices further eased the burden on consumers.

A crucial factor contributing to this reported dip was the correction of an error in the Vehicle Excise Duty (VED) series. This miscalculation had previously inflated April's inflation data, but the corrected series was implemented from May, ensuring a more accurate reflection of price changes. Had this error not occurred, April's inflation figure would also have been 3.4%, meaning the inflation rate essentially held steady across the two months.

Further downward pressure on the overall inflation rate came from housing and household services, which saw their annual rate decrease from 7% to 6.9%. This was predominantly due to a slight easing in owner occupiers' housing costs, moving from 6.9% to 6.7%. Services inflation, a key metric closely watched by the Bank of England for underlying domestic price pressures, also showed a deceleration, slowing from 5.4% to 4.7%.

However, not all components moved downwards. The largest upward contributions to inflation in May originated from food and non-alcoholic beverages, which saw their annual rate accelerate to 4.4% from 3.4%. This increase was particularly noticeable in categories like chocolate, confectionery, and ice cream.

Furthermore, prices for furniture and household goods experienced an uptick of 0.8%, marking their most significant rise since December 2023. On a monthly basis, the Consumer Price Index (CPI) recorded a modest increase of 0.2% in May, indicating continued, albeit slower, price growth across the economy.

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