The Consumer Prices Index rate of inflation remained at 2.4 per cent in May, unchanged from April, the Office for National Statistics has revealed.
Brown Shipley investment analyst Jonathan Chitty said the figure is a “shade behind expectations” at 2.5 per cent. “Given the rally in oil prices seen earlier in the second quarter, the biggest upward contribution unsurprisingly came from transportation costs. There was a slower than anticipated rise in the price of video games, however, which offset the increase.
“Inflation has been running ahead of the Bank of England’s 2 per cent target for over a year now but has fallen back significantly since its peak in November as the impact of a weaker sterling has moderated," he said.
Furthermore, Hargreaves Lansdown senior economist Ben Brettell highlighted that yesterday’s weak wage growth, along with today’s inflation figures, gives “further food for thought for the MPC, as they consider an August rate rise”.
“Market reaction to the data was muted, with sterling losing marginally and the FTSE slightly higher…some will say these figures add weight to the case for higher rates. But a slew of recent weaker data has dented expectations it will happen in August. Yesterday’s wage growth numbers were lower than expected, and data released on Monday showed manufacturing output dropped in April.
“Overall I think the MPC will want confirmation that the Q1 growth figure was just a blip before raising borrowing costs,” he added.