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Markets had forecast a drop from April’s level, while the
BoE was already widely expected to raise interest rates again Thursday to
combat an inflation rate which is the highest among G7 nations.
The latest data is a blow also for Prime Minister Rishi
Sunak, who has made cutting inflation a priority for his Conservative
government heading into a general election next year.
Britain has endured months of strikes by workers demanding
higher wages to help with the cost-of-living crisis.
“We know how much high inflation hurts families and
businesses across the country,” finance minister Jeremy Hunt said following the
latest consumer prices index data.
UK inflation had been expected to cool to 8.4 per cent last
month while core inflation, which strips out food and energy costs,
unexpectedly jumped to 7.1 per cent in May, said the Office for National Statistics.
“Core inflation rose again, to its highest rate in over 30
years,” noted Sarah Coles, head of personal finance at Hargreaves Lansdown.
“Lower energy costs will eventually feed into prices across
the board, and we should see the pain at the supermarket subside a little in
the coming months.
“However, in an awful lot of cases this isn’t going to bring
prices down, they’ll just get more expensive more slowly,” she added.
Higher rates
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said
the latest figures “warn that inflationary pressures in the UK are not under
control and call for further rate hikes which will further squeeze the British
households”.
The BoE has already lifted borrowing costs to a 15-year high
at 4.5 per cent in a bid to cool inflation.
This is set to rise further Thursday following a regular
policy meeting in what would be the central bank’s 13th rate increase in a row.
“We will not hesitate in our resolve to support the Bank of
England as it seeks to squeeze inflation out of our economy,” Hunt said.
The government wants to see inflation reduced to five per
cent by the end of the year, which would be around half the level at the start
of 2023.
“Despite a modest easing in food price inflation, headline
inflation remains at high levels,” noted Yael Selfin, chief economist at KPMG
UK.
“More worryingly for the Bank of England, strong core
inflation suggests that firms may now be passing on the rising costs from
higher wage bills to consumers.”
Despite easing to 18.4 perc ent in May, annual food price
inflation remains close to an all-time high.
At the same time, mortgage rates and rents are soaring,
biting hard into disposable income for millions of Britons, as pay rises fail
to keep pace with the annual inflation rate.
AFP