Surprisingly benign UK inflation data signals a softer Iran war hit than feared
Summary
UK inflation stayed steady at 2.8% in May, which was better than expected after concerns about rising costs from the war in Iran. This suggests the conflict has had a smaller impact on the UK economy than first feared, and interest rates are likely to stay the same for now.Key Facts
- Inflation in the UK was 2.8% in May, unchanged from April and below the expected 3%.
- The price of petrol in the UK rose 25% compared to the previous year.
- Food prices fell slightly by 0.1% from April to May.
- UK and EU inflation trends have been similar, even though some EU countries cut fuel taxes.
- The Bank of England left interest rates at 3.75%, with no increase expected soon.
- The reopening of the Strait of Hormuz after a US-Iran peace deal helped lower oil prices below $80 per barrel.
- The Bank of England says companies cannot raise prices much because customers cannot afford higher costs.
- Some inflation pressures, like higher fertiliser costs, may still appear in the coming months.
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