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Thursday 17th of June 2010
June 15, 2010    

UK inflation eases to 3.4% in May

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by Kay Murchie

The Office for National Statistics (ONS) has today announced Consumer Price Inflation (CPI) fell to 3.4% in May - down from the 17-month high of 3.7% in April.

While the level still far exceeds the 2% target, the drop was quicker than the 3.5% many analysts had expected.

The Bank of England’s Governor, Mervyn King, has already reiterated that CPI will fall to the 2% target before the end of the year.

The fall in the inflation rate was attributed to weaker rises in food and petrol prices, according to analysts.

In the meantime, on a monthly basis, CPI rose by 0.2%, less than the 0.3% gain expected by analysts.

Meanwhile, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, also eased to 5.1%, from 5.3% in April.

The CPI inflation rate is a benchmark for the Bank of England’s Monetary Policy Committee (MPC) but last week, the Committee elected to keep UK interest rates on hold at the historically low level of 0.5% for the 15th consecutive month.

Mr King has previously dismissed fears that soaring inflation would demand a significant rise in interest rates in the months ahead.

As a result, most analysts expect no monetary tightening until the final quarter of the year.

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