UK Inflation Stays Flat at 3.4% in May—Exactly as Predicted

No surprises here: UK inflation refuses to budge.

The Numbers Game

May's Consumer Price Index (CPI) print hit 3.4%—dead in line with analyst forecasts. No drama, no shocks—just another day in fiat-land where central bankers cross their fingers and hope.

Why It (Doesn’t) Matter

While traditional markets yawn at the status quo, crypto traders smirk. Another month of stagnant inflation? Just more proof that decentralized assets outperform bureaucratic monetary policy.

The Punchline

Meanwhile, hedge funds will spin this as 'stability' while quietly rebalancing into BTC. Classic finance—always one step behind.

ONS flags transport as main factor behind monthly change

Core inflation, which leaves out food, alcohol, tobacco, and energy, fell from 3.8% in April to 3.5% in May. The ONS said transport costs made the biggest downward impact on the overall inflation rate. But it wasn’t a clean drop—food, furniture, and household goods kept inflation under pressure.

Richard Heys, acting chief economist at the ONS, explained it like this: “A variety of counteracting price movements meant inflation was little changed in May.” Richard also said airfare prices fell compared to the same time last year, mainly because Easter and school holidays landed in different weeks. He added that motor fuel costs also dropped in May, pushing down overall prices in the transport sector.

The British pound ticked up 0.22% against the US dollar, reaching $1.345 after the inflation figures came out. Investors appeared unmoved, seeing no real surprise in the numbers.

Speaking after the data release, UK Finance Minister Rachel Reeves responded by saying, “The Treasury has taken the necessary choices to stabilise the public finances and get inflation under control.” But Rachel also admitted, “there’s more to do.”

Bank of England holds back, looks ahead to August rate decision

The inflation data landed right before the Bank of England’s next monetary policy meeting scheduled for Thursday. With inflation still running well above the 2% target, the central bank is expected to leave interest rates unchanged at 4.25%. Analysts believe the bank will delay its next rate cut until August, assuming no further surprises come from energy markets or economic data.

Back in early 2025, the Bank had forecast inflation to climb to 3.7% in Q3 before finally cooling next year. But things have changed since then. Fresh conflict between Israel and Iran has brought oil prices back into the inflation debate. The risk now is that those prices keep rising and push UK inflation higher than originally expected.

Rob Wood, chief UK economist at Pantheon Macroeconomics, said inflation could average 3.4% this year, but he expects it to rise slightly and peak at 3.6% in September. Rob said the current print doesn’t include the full effect of the latest spike in oil prices, which came after tensions escalated in the Middle East.

“We are yet to fully factor in higher oil prices following events in the Middle East — we use a 15-day average of prices to smooth volatility — but WOULD need to raise the inflation peak to 3.7% if oil and natural gas prices are sustained at their current levels. We would bump up the peak to 3.8% if oil prices reach $80 a barrel and natural gas prices match those rises proportionately,” Rob said.

Crude oil futures jumped over 4% on Tuesday after President Donald TRUMP told Iran’s Supreme Leader Ayatollah Ali Khamenei to agree to what he called an “unconditional surrender.” That headline alone pushed global oil markets into a frenzy and added more weight to the inflation outlook for the next quarter.

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