CPI inflation fell slightly to 3.4% in May, the latest ONS figures show.
It had been published at 3.5% in April, but this included a miscalculation of the impact of new car tax rates. With the correct calculation, this would have been 3.4%.
On a monthly basis, CPI rose by 0.2% compared to 0.3% a year earlier.
Core CPI (excluding energy, food, alcohol and tobacco) was 3.5%, down from 3.8% in April.
Several industry experts were downbeat about the 'sticky' inflation figure, with some predicting an August rate cut at the earliest and others now predicting that we may see just one more rate cut this year.
Just one further rate cut this year?
Kevin Brown, savings expert at Scottish Friendly, said: “While it’s a relief that inflation didn’t jump again, like it did last month, it won’t be enough to sway the Monetary Policy Committee (MPC) into cutting rates just yet. We’re still looking at August at the earliest — and possibly later."
Peter Stimson, director of mortgages at MPowered, commented: "the prospects of the Bank of England cutting its base rate again on Thursday - already very slim - have evaporated.
“The swaps market - which mortgage lenders use to set the interest rates they offer on new loans - is already implying that there will be just one further cut to the base rate this year.
“Until last week, it wasn’t unreasonable to expect that this cut might come in August. But with inflation proving increasingly stubborn, the probability of this happening has slipped to no more than 50/50. With events in the Middle East causing increasing uncertainty, the timeline could well be shifted to later in the year.
“Mortgage rates may well have fallen as far as they can for now, and in the coming weeks rates may even creep up back as lenders recalibrate in response to rising swap rates.”
George Lagarias, chief economist at Forvis Mazars, added: “UK inflation remains elevated, without including the latest jump in energy prices. Consumers are beginning to feel the heat of inflation again. Prices for food, clothing, furniture, household goods and restaurants rose, and were really only offset by transportation costs. With the war in the Middle East pushing energy prices higher, that transportation offset might very well disappear by the next month. The Bank of England is being proven right to wait before cutting rates. We wouldn’t be too surprised if the central bank ended up delivering less than two rate cuts until the end of the year."
Dean Butler, managing director for retail direct at Standard Life, agreed: “At 3.4%, the Consumer Price Index sits significantly above the Bank of England’s 2% target, and while many had hoped for a smoother path to interest rate cuts in 2025, it seems likely we’ll continue to see a cautious approach from the Bank, particularly in the context of increasing global instability. Any further cuts this year will probably be incremental, as the Monetary Policy Committee looks to balance the UK’s need for growth with the risk of fuelling inflation."
The current expectation of two more cuts this year still looks plausible
However, others were more upbeat, noting that inflationary pressures are continuing to ease.
Chris Beauchamp, chief market analyst at IG, said: "Today's price data gives the Bank of England reason for a cautious sigh of relief, easing the pressure on the bank to respond in a more hawkish manner to inflation. The current expectation of two more cuts this year still looks plausible, but it hinges on oil prices remaining contained despite the conflict in the Middle East. The slowdown in services inflation is particularly good news for policymakers. "
Richard Pike, chief sales and marketing officer at Phoebus, commented: "The drop in inflation today may reignite some hope of a further interest rate cut by the Bank of England tomorrow, which many expected we wouldn’t see until later in the year.
“While policymakers are likely to remain cautious, particularly with wage growth still elevated, today’s figures offer a welcome sign that inflationary pressures are continuing to ease. For lenders and borrowers, that could translate into greater confidence in the months ahead, especially for those approaching the end of fixed-rate deals or considering entering the market."
David Morrison, Senior Market Analyst at Trade Nation, added: "The latest ONS figures for May 2025 show that UK inflation eased slightly, with the Consumer Prices Index rising by 3.4% in the 12 months to May, down from 3.5% in April and broadly in line with market expectations. The dip marks a continuation of the cooling trend seen earlier in the year and reinforces expectations that the Bank of England could begin cutting interest rates as soon as August.
"It’s a welcome drop from the previous readings, although both headline and Core CPI are still higher than they were at the beginning of the year. Sterling rallied on the news, as the consensus market expectation was that headline inflation (which includes food and energy) would come in a touch softer than it did. But it changes nothing as far as tomorrow’s rate decision from the Bank of England is concerned. The Bank is expected to keep rates unchanged again."
