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United Kingdom Inflation May 2024

United Kingdom: Inflation drops to lowest level since April 2021 in May

Inflation inched down to 2.0% in May following April’s 2.3%, in line with the Bank of England’s 2.0% target and market forecasts. May’s result represented the weakest inflation rate since April 2021. Looking at the details of the release, prices for food and recreation and culture grew at slower rates in May.

In addition, the trend pointed down, with annual average inflation coming in at 4.6% in May (April: 5.1%). Meanwhile, core inflation fell to 3.5% in May from April’s 3.8%.

Finally, consumer prices increased 0.34% in May over the previous month, broadly unchanged from April’s 0.33% rise.

Digging into the data, Nomura analysts saw cause for concern for the Bank of England:

“Services inflation once again – for a fourth consecutive month – surprised consensus on the upside by 0.2pp in May, though this was less than the case in April (0.4pp). The primary factor behind the upside miss […] (relative to our forecast at least) was airfares – a single component and a volatile one at that. As such, the policy repercussions from this miss may not be as significant. Still, sticky services inflation is not helpful for the August rate-cut cause.”

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