In May, consumer prices rose by 0.2% M/M in the UK, in line with expectations and the annual level stayed unchanged at 4.5% Y/Y. Looking at the details, prices of food & non-alcoholic beverages (1.3% M/M), alcoholic beverages & tobacco (0.7% M/M), fuels & lubricants (1.3% M/M), communication (0.9% M/M), restaurants & hotels (0.5% M/M) and clothing & footwear (0.4% M/M) rose significantly in May. Transport (-0.4% M/M), health (-0.2% M/M), housing, water, electricity & gas (-0.1% M/M) and recreation & culture (-0.1% M/M) became cheaper in May.
Core CPI, excluding food & energy, dropped significantly in May, falling from 3.7% Y/Y to 3.3% Y/Y, while the consensus was looking for a more moderate decline (to 3.5% Y/Y). While the outcome was in line with expectations, it is still a bit disappointing that inflation did not fall back after the strong increase in April, partly due to the timing of Easter and the Easter Holidays. The BoE still expects inflation to reach 5% this year, so this outcome should have no impact on their policy decision.