Rise in core inflation shows we are not yet out of the woods

Commenting on today’s data from the Office of National Statistics, that showed the annual rate of CPI inflation remaining flat at 8.7% in May 2023, with core inflation rising from 6.8% to 7.1%, Kitty Ussher, Chief Economist at the Institute of Directors, said:

“The market was expecting the headline rate of inflation to fall slightly in May, driven by early signs that food price inflation had peaked, and continuing reductions in the price of petrol. However, these falls have been offset by increases in the price of services, notably recreation and culture, but also air travel and prices charged in restaurants and hotels.

“Possible explanations are the continuing impact of high energy costs and strong wage pressure being passed through to prices, all overlaid with high demand for leisure activities among households with disposable incomes.

“Overall, the rise in core inflation shows we are not yet out of the woods, meaning there is little doubt the Bank of England will raise rates tomorrow; the question is by how much.”