THE UK’s rate of inflation fell slightly in May.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) rate of inflation measured 3.4% in the 12 months to May.
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Inflation is a measure of how the price of goods and services is rising or falling, which can affect people’s household finances.
Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.5% in the 12 months to May 2025, down from 3.8% in the 12 months to April.
It comes ahead of the Bank of England’s interest rate decision tomorrow, when it will decide whether to hold or cut rates.
In the previous month overall inflation sat at 3.5% while in March it was 2.6%.
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Although it’s worth noting that since releasing April’s data, the ONS said that an error in vehicle tax data means April’s CPI rate was actually slightly lower, at 3.4%. However, the ONS has a policy not to revise inflation figures, so officially, last month’s figure remains at 3.5%.
Meanwhile, May’s figure is higher than most economists’ predictions of 3.3% and is still well above the Bank of England’s target of 2%.
But forecaster S&P Global Market Intelligence expected the May inflation figure to hit 3.6%, with a further rise to 3.7% in June.
Falling inflation means that prices are still rising but just not as fast as the previous month.
Commenting on the figures, acting chief economist at the ONS Richard Heys said: “A variety of counteracting price movements meant inflation was little changed in May.
“Air fares fell this month, compared with a large rise at the same time last year, as the timing of Easter and school holidays affected pricing.
“Meanwhile, motor fuel costs also saw a drop.”
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He added that these were partially offset by rising food prices, particularly items such as chocolates and meat products.
The cost of furniture and household goods, including fridge freezers and vacuum cleaners also increased, he confirmed.
In addition, the impact of household bill increases in April were still being felt last month, causing inflation to remain high.
But falling energy costs have been one of the biggest reasons inflation has decreased from its peak during the cost-of-living crisis.
Chancellor Rachel Reeves said today that there was “more to do” to bring down inflation and help with the cost of living.
She said the Government’s “number one mission is to put more money in the pockets of working people”.
She added: “We took the necessary choices to stabilise the public finances and get inflation under control after the double digit increases we saw under the previous government, but we know there’s more to do.”
Dean Butler, managing director for retail direct at Standard Life, part of Phoenix Group, said: “While many had hoped for a smoother path to interest rate cuts in 2025, it seems likely we’ll continue to see a cautious approach from the Bank, particularly in the context of increasing global instability.
“Any further cuts this year will probably be incremental, as the Monetary Policy Committee looks to balance the UK’s need for growth with the risk of fuelling inflation.”
It’s widely expected that the Bank of England will hold interest rates tomorrow.
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we’re earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
What it means for your money
Falling inflation is generally good news for households.
When the inflation rate falls many households hope that the Bank of England will reduce its base rate, which could lower the interest on mortgage deals.
Lenders use the base rate to determine the interest rates they offer to customers on savings and borrowing costs, including mortgages.
Alice Haine, personal finance analyst at Bestinvest, said: “For existing borrowers looking to remortgage, whether their repayments will rise or fall will depend on when they secured their current deal.
“Most borrowers are on fixed rates, so those emerging from two-year fixes secured when interest rates were higher than now may receive some reprieve.”
But she said the outlook is “less rosy” for borrowers coming to the end of cheap five-year mortgages who took them out when interest rates were at record low levels.
She said: “They are potentially looking at much higher mortgage costs unless they have managed to pay off a chunk of their balance.”
If the bank continues to cut rates it could also mean that savers earn less interest on the money they deposit.
Sally Conway, savings expert at Shawbrook, says: “Savers are facing a squeeze.
“Inflation is sticking, everyday costs are still rising – and interest rates on many savings accounts have been coming down.
“With further rate cuts expected, the opportunity to lock in higher returns may not last much longer.”
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Meanwhile, oil prices have been rising in recent days after Israel launched an attack on Iran’s nuclear programme, raising concerns that the supply of crude from the Middle East could be disrupted.
This could also threaten to push up inflation in the UK.
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