UK Inflation Rate Declines for Third Straight Month

UK Inflation Continues Downward Trend

New data from the Office for National Statistics shows UK inflation has eased for the third consecutive month. The Consumer Prices Index (CPI) rose by 3.4% in the 12 months to May 2025, down from 3.5% in April. The preferred CPIH measure - which includes owner-occupiers' housing costs - fell to 4.0% from 4.1%.

Drivers of the Slowdown

The easing was primarily driven by falling air fares and petrol prices. Aviation fuel costs decreased significantly after global oil prices stabilized, while intense competition among airlines kept ticket prices in check. Motorists saw relief at the pumps with average petrol prices dropping 2.3% month-on-month.

However, food prices continued to climb, particularly for fresh produce. The ONS noted that adverse weather conditions in southern Europe had impacted vegetable supplies, partially offsetting the overall decline.

Historical Context and Outlook

This marks the lowest inflation reading since early 2022, though prices remain well above the Bank of England's 2% target. Core inflation - excluding volatile energy and food prices - eased to 3.5%, while services inflation moderated to 4.7%.

Economists at the House of Commons Library project inflation will remain above 3% throughout most of 2025. The Bank of England expects a slight uptick to 3.5% by Q3 before gradually returning to target levels in early 2027.

Impact on Households

The gradual cooling brings some relief to households after the 2022 peak of 11.1% - the highest in 41 years. While wage growth has recently outpaced inflation, the prolonged cost-of-living squeeze has left many budgets stretched thin. Consumer confidence surveys indicate households remain cautious about spending despite the improving trend.