ANNUAL UK inflation remained at 2.4 per cent in May, in spite of a surge in petrol prices, official figures show.
The annual consumer prices index inflation rate remained at its lowest since March 2017 even though petrol prices surged by 4.6p-a-litre between April and May, the Office for National Statistics figures data revealed.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, described the unchanged inflation rate as a “relief for consumers and the Bank of England”.
Mr Archer said: “This avoided a double setback to the slow improvement in consumer purchasing power as earnings growth dipped in April.”
He believed the inflation data would fuel expectations that the Bank would hold off from raising UK base rates again until November, rather than increasing the cost of borrowing in August. The Bank will publish its next quarterly inflation report in August. The Bank raised rates by a quarter-point from a record low of 0.25% last November.
ONS data this week showed, in nominal terms, average weekly earnings for households in Great Britain in the February to April period were up 2.5% on the same period of last year. The year-on-year rise in earnings in the three months to March was 2.6%.
Mr Archer voiced his belief that annual UK CPI inflation would climb again in the short term on the back of a jump in oil prices and increases in electricity and gas bills unveiled in recent weeks by energy suppliers.
He said: “We expect inflation to rise back up to 2.7% in the next couple of months.”
He declared a gradual downward trend was likely to resume in the autumn, “helped by favourable base effects and the impact of sterling’s past weakness continuing to unwind”.
Mr Archer said: “The Bank of England may be relieved that inflation did not move back up in May and it will likely fuel expectations that the Monetary Policy Committee will hold off from raising interest rates until late in the year. There can be no doubt at all that the Bank will hold interest rates at 0.5% after the June MPC meeting.”
He added: “We believe it is becoming increasingly likely the Bank will hold off from raising interest rates in August and wait until November. There will need to be sustained clear evidence the UK economy has improved since the first quarter for the MPC to act. A dire set of April manufacturing, construction and trade data looks to have raised the bar higher for an August hike.”
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