UK Inflation Holds at 2.8% as Hormuz Oil Shock Fails to Broaden

3 articles · Updated · The Guardian · Jun 17

Britain’s May inflation rate stayed at 2.8%, below forecasts for 3%, reinforcing signs that the Middle East war has not yet driven a wider cost-of-living surge.
Food prices fell 0.1% on the month and other goods stayed soft even as motor fuel prices jumped 25% from a year earlier, suggesting firms lack the pricing power to pass higher energy costs on.
At 3.75%, the Bank of England is still expected to leave rates unchanged on Thursday, while markets have pushed any likely hike back toward November rather than September.
Oil has already dropped below $80 a barrel after the US-Iran peace deal raised hopes of reopening the Strait of Hormuz, easing the Bank’s worst-case inflation scenario.
Inflation still sits above the 2% target, and fertiliser costs could feed through later, but economists are cutting near-term forecasts and some now see the next move eventually turning into a rate cut.