FX.co ★ UK Inflation Rate Edges Down to 3.4%

In May 2025, the UK observed a slight dip in its annual inflation rate, which decreased to 3.4% from April’s 3.5%, aligning with economic forecasts. The primary factor contributing to this decline was a significant reduction in transport costs, which dropped to 0.7% from the previous 3.3%. This change was largely attributed to a decrease in airfares, which fell by 5%, driven by the scheduling of Easter and the accompanying school holidays, along with a reduction in motor fuel prices. An additional factor in the decrease was a correction in the Vehicle Excise Duty series data, rectifying an error that had previously affected April’s figures; this correction was reflected from May onwards. Housing and household services also exerted downward pressure, seeing a slight decrease from 7% to 6.9%, particularly in owner occupiers' housing costs, which fell to 6.7% from 6.9%. The inflation rate for services also declined, easing to 4.7% from 5.4%. Conversely, the largest upward pressures came from food and non-alcoholic beverages, which increased to 4.4% from 3.4%, primarily due to higher prices for chocolate, confectionery, and ice cream. Additionally, furniture and household goods prices surged to 0.8%, marking the highest increase since December 2023. Overall, compared to the previous month, the Consumer Price Index (CPI) experienced a 0.2% rise.