UK CPI inflation in May, at 3.4%, remained considerably higher than the Bank of England’s 2.0% official target. This was in line with forecasts beforehand, and it was a marginal slowdown from April’s 3.5% figure, which the ONS has since stated was overstated by 0.1 percentage point because of an error in its estimation of car taxes.

Going forward, CPI inflation is likely to be distorted by the potential impacts of increased conflict in the Middle East, which has already pushed oil prices higher, and they may remain high if there are persistent disruptions to oil supply. This could potentially have a significant impact on inflation throughout the economy as the effect of higher oil prices spreads.

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