- British Retail Consortium
The UK inflation unexpectedly held steady in May against predictions for a small increase, as ongoing declines in clothing and food prices offset rising pressure from fuel prices. The Office for National Statistics reported that Britain's cost of living remained at 0.3% last month compared with a year ago, slightly below economists' forecasts for a 0.4% annual rise. Upward pressure on inflation in May came from transport costs as motor fuel prices jumped 2.7% compared with 1.9% a year earlier. At the same time, downward pressure came from food and non-alcoholic drinks, which declined 0.4%, and from clothing, which slipped 0.2% compared with a 0.5% increase a year ago.
Bank of England policy makers gathers this week amid expectations they will hold off lifting the benchmark interest rate from a record-low 0.5% until early 2017. Britain's inflation has been below the 2% target for more than two years, and the central bank forecasts are for a gradual increase with the rate only returning to the goal in mid-2018. Moreover, there is speculation that borrowing costs could even be reduced to support the economy if Britain votes next week to exit the European Union.
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