UK Inflation Rate Unchanged at 8.7 Percent in May

Mortgage-holders to feel the pressure of increased interest rates

A customer shops for food items inside a Tesco supermarket store in east London, on Jan. 10, 2022. Daniel Leal/AFP via Getty Images

The UK’s Consumer Prices Index (CPI) inflation rate stayed at 8.7 percent in May, the same level as in April.

Experts had forecast a fall to 8.4 percent, but inflation has proved more stubborn than expected.

The inflation figure, which the Office for National Statistics (ONS) said is still at “a historically high level,” is likely to put more pressure on the Bank of England to raise interest rates further.

It is also likely to pile even more pressure on mortgage-holders as rates are already at close to 15-year highs.

Stubborn Inflation

ONS Chief Economist Grant Fitzner said: “After last month’s fall, annual inflation was little changed in May and remains at a historically high level.

“The cost of airfares rose by more than a year ago and is at a higher level than usual for May. Rising prices for second-hand cars, live music events, and computer games also contributed to inflation remaining high.”

But he said the price rises were partly offset by a fall in the cost of petrol.

The ONS also said that the increase in food prices slowed from 19.1 percent in April to 18.4 percent in May, after hitting a 45-year high in March.

The increase in the price of milk, cheese, and eggs eased the most, the ONS said, while fish was the only food item whose price rise sped up, largely driven by the price of canned tuna.

Government to ‘Stick to Its Guns’

Commenting on the figures, Chancellor Jeremy Hunt said: “Today’s figures strengthen the case for the government to stick to its guns. No matter what the pressure from left, right, or centre, we won’t be pushed off course.

“Because if we are going to help families, if we are going to relieve the pressure on people with mortgages, on businesses, we need to squeeze every last drop of high inflation out of the economy.”

But opposition parties blamed the Conservative government.

Labour’s shadow chancellor Rachel Reeves said: “This Tory government can’t get a grip of this problem because they are the problem. Thirteen years of the Tories and their disastrous mini-budget are damaging our economic security and leaving families worse off.”

Liberal Democrat Treasury spokeswoman Sarah Olney said: “These worse-than-expected figures show the government is failing miserably to bring inflation down and provide relief for struggling families facing soaring bills. Home-owners now face the likelihood of even more interest rate hikes adding to their monthly mortgage payments, all while the chancellor just sits on his hands.”

Interest Rate Hike Expected

Confederation of British Industry lead economist Alpesh Paleja said, “The absence of movement in CPI inflation underscores the persistent nature of current cost and price pressures, with households and businesses left feeling the pinch.”

“In particular, the ongoing strength in food price inflation means that many will have to keep tightening their belts for some time,” he added.

Paleja said another interest rate rise “looks like a done deal, with the prospect of at least one further rise in August to fully bring inflation under control.”

The Federation of Small Businesses (FSB) pleaded with the Bank of England to “show moderation” when making decisions on interest rate rises.

FSB National Chair Martin McTague said: “Today’s rise in core inflation will leave many understandably nervous. The consequences of further interest rate hikes are far from trivial for small businesses. Higher interest rates tighten the purse strings further, stifling the growth and prosperity of our small business sector.

“The potential economic fallout from high-interest rates isn’t confined to balance sheets. It will affect every aspect of our society, from employment rates to consumer spending and beyond, so we urge the Bank of England to show moderation.”

PA Media contributed to this report.