The Iran conflict has driven up fuel prices. Photograph: Kevin Wheal/Alamy
UK inflation stays steady at 2.8% despite Iran conflict driving up fuel prices
Flatlining figure confounds forecasts of an increase to 3% as Bank of England prepares to set interest rates
UK inflation unexpectedly remained at 2.8% last month despite the Middle East war driving up energy prices, official figures have shown.
May’s annual price rise reading recorded by the Office for National Statistics confounded economists’ forecasts of a rise to 3%.
The flatlining figure came after a decline in the consumer prices index to 2.8% in April, as cuts to domestic energy bills announced by Rachel Reeves at last year’s budget took effect.
The reading is still above the government’s 2% target for Bank of England policymakers, who are preparing to set interest rates on Thursday. They are widely expected to leave borrowing costs on hold at 3.75% for now, as they assess the impact of the conflict.
The closure of the strait of Hormuz to shipping has driven up oil prices over the past three months, with knock-on effects for the cost of fuel products, chemicals and fertiliser.
Economists hope the agreement reached between Donald Trump and the Iranian regime at the start of the week will reopen the maritime chokepoint in the coming weeks, helping to ease price pressures.
More details to follow soon …
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