Commenting on the Office of National Statistics Consumer Price Index for May 2025,
Adam Deasy, Economist at PwC, comments:
"After April’s inflation spike, May brought a moment of calm. CPI eased slightly to 3.4% year-on-year, down from 3.5%, driven primarily by reductions in transport costs. This came as airfares fell, which were higher than usual last month given the timing of Easter, as well as the correction of overstated figures in April.
“Attention, as always, will be on services inflation. Last month’s sharp rise was flattered by one-offs like road tax changes and air fares, which are somewhat reversed in this month’s fall from 5.4% to 4.7%. Meanwhile key divisions the Bank focuses on, such as restaurants, health and recreation were largely steady in the month.
“While gradual disinflation is still the expectation, intensifying tensions in the Middle East and potential oil price spikes provide a further hurdle in the road to price stability. However a major price jump would likely require a serious escalation given current supply buffers in Saudi Arabia and the UAE.
"A rate cut at Thursday’s meeting was never likely, but if growth stays subdued and inflation continues its downward drift, the Bank is still on track to continue easing gradually later in the year. The most likely course remains a steady, quarterly rhythm of cuts; a slow-release valve to support the economy as inflationary pressure fades."
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