UK inflation holds steady at 2.8% in May

U.K. inflation held at 2.8% in May, slightly below expectations, official figures showed on Wednesday.

Economists polled by Reuters had been expecting the annual inflation rate to rise to 3% in May.

Inflation cooled to 2.8% in April, but the drop — attributed to a change to the U.K.'s regulated energy price cap — was expected to be short-lived. The price cap is due to rise by 13% later this summer, when energy costs will hit a 2-year high.

The U.K.'s May print fell below the euro zone's 3.2% reading for May, and well below the U.S. May inflation rate of 4.2%.

Britain's Office for National Statistics said Wednesday that transport had been the biggest contributor to rising prices in May, partially offset by falling food and non-alcoholic drink prices.

Surging prices of air fares, which were up 10.3% month-on-month, as well as motor fuel and sea fares lifted transportation costs for Britons in May, the ONS said. Analysts said the timing of the Easter holiday this year may have contributed to rising fares.

Meanwhile, the price of gasoline rose by an average 0.6 pence (0.8 U.S. cents) per liter between April and May. In the same period a year earlier, average gasoline prices fell by 2.1 pence. Average prices rose to their highest since November 2022, when energy prices spiked in the wake of Russia's full-scale invasion of Ukraine.

At its most recent meeting, the Bank of England's Monetary Policy Committee voted to keep its key interest rate at 3.75%.