UK inflation unchanged at 0.3% in May

UK

Inflation remained at 0.3% in May after a rise in transport costs and hotel bills was offset by the falling cost of clothes and food.

The Office for National Statistics said a slide in the price of games, toys and hobby items also played a role in keeping the consumer prices index (CPI) at the same level as April and below 1% since the end of 2014.

Despite its remit to maintain inflation at around 2%, the Bank of England is not expected to react to the figure when it meets on Thursday, a week before the UK’s referendum on membership of the European Union.

Much of the weakness in prices has been blamed on the uncertainty created by the referendum, limiting business investment and causing consumers to delay big purchases.

James Knightley, an economist at ING Financial Markets, said: “[Market] reaction is likely to be limited as Brexit is the far more important theme for central bank policy in the near term.

“For what it is worth, if the UK stays in the EU, the growth outlook will look positive and we think headline inflation will be back towards 2% this time next year.

“However, should the latest polls prove to be correct and the UK votes to leave the EU we are probably going to see an emergency BoE meeting with a rate cut and some form of credit easing pretty soon after the referendum result is declared in an effort to shore up confidence.”

Powered by Guardian.co.ukThis article was written by Phillip Inman Economics correspondent, for theguardian.com on Tuesday 14th June 2016 10.03 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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