Inflation: Bank of England likely to hold interest rates
May inflation effectively holds steady once ONS correction to April CPI is factored in.
18th June 2025 07:53
by Myron Jobson from interactive investor
Instead of easing, inflation in May effectively held steady at 3.4% once the ONS’s correction to April’s CPI is taken into account.
“In any case, the latest inflation report is unlikely to be enough for the Bank of England’s rate-setting Monetary Policy Committee to feel confident about cutting borrowing costs when it announces its next interest rate decision tomorrow.
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“Uncertainty about the outlook for inflation - with Trump’s tariffs remaining the biggest wild card for the Bank despite the trade deal - combined with the recent spike in global oil prices, which exacerbates matters, means the Bank is likely to adopt a wait-and-see stance on interest rates tomorrow. Essentially, the reasons to hold rates seemingly outweigh those to cut, despite the recent contraction in UK economic growth.
“Transport costs helped to bring down inflation slightly last month, but this was offset by rising food and furniture prices. Looking beyond the headline figure, core inflation - which strips out volatile food and fuel costs to provide a clearer sense of the underlying trend - eased as expected.
“It is important to remember that inflation affects everyone differently. We all have a personal inflation rate because our spending habits vary. Depending on the goods and services you buy, your personal inflation rate may be lower - or higher - than the headline figure.”
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