Persistent inflation suggests that the Bank of England will keep interest rates steady

UK inflation was 3.4% in May, down from the publicised figure of 3.5% in April.

The Office for National Statistics (ONS) noted that last month’s figure was overstated due to an error in car tax data and the subsequent correction helped make transport the largest downward contributor to price growth in May.

Headline inflation remains well above the Bank of England’s 2% target, with rising labour costs and energy prices continuing to exert upward pressure. As such, we believe today’s data strengthens the case for the Bank of England to keep interest rates on hold at tomorrow’s Monetary Policy Committee meeting.