UK inflation steady at 8.7%

Bank of England 'has a lot to learn' as inflation failures bite

Consumer price inflation across the U.K. was unchanged at 8.7% in the year to May against expectations for a modest decline, official figures showed Wednesday, a development that is set to see the Bank of England raise the cost of borrowing again.

The Office for National Statistics said rising prices for flights, recreational and cultural goods and services, and second-hand cars boosted the inflation rate, while gas prices at the pump provided the biggest downward pressure.

“After last month’s fall, annual inflation was little changed in May and remains at a historically high level,” the agency’s chief economist Grant Fitzner said.

Financial markets think news of the unchanged rate will mean the Bank of England will increase its benchmark interest rate on Thursday from the current 15-year high of 4.5%.

Like other central banks, the bank has aggressively raised borrowing rates over the past 18 months or so after inflation spiked sharply, first because of bottlenecks caused by the coronavirus pandemic and then Russia’s invasion of Ukraine, which sent energy and food prices surging.