Standard Life and Hargreaves Lansdown comment as CPI inflation fell slightly to 3.4% in May. It had been published at 3.5% in April, but this included a miscalculation of the impact of new car tax rates. With the correct calculation, this would have been 3.4%. On a monthly basis, it was up 0.2% (0.3% a year earlier). Core CPI (excluding energy, food, alcohol and tobacco) was 3.5% (down from 3.8% in April) and services inflation was 4.7% (5.4% in April).
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Dean Butler, Managing Director for Retail Direct at Standard Life, part of Phoenix Group said: “Summer is on the horizon and inflation is refusing to cool down, with May’s inflation figures showing that the UK’s price pressures remain persistent. At 3.4%, the Consumer Price Index (CPI) sits significantly above the Bank of England’s 2% target, and while many had hoped for a smoother path to interest rate cuts in 2025, it seems likely we’ll continue to see a cautious approach from the Bank, particularly in the context of increasing global instability. Any further cuts this year will probably be incremental, as the Monetary Policy Committee looks to balance the UK’s need for growth with the risk of fuelling inflation.
“For mortgage holders and those with other borrowing costs, a high-inflation, high-interest rate environment will be particularly unwelcome. Savers, however, have an opportunity to continue to benefit from inflation-busting returns – there are still some best-buy easy-access savings accounts offering rates between 4 and 5%. It’s important to shop around, as there are also rates far lower than this on the market. For those able to accept a level of risk, investing offers the potential for higher growth, but remember that investments can go down as well as up. If you’re able to take a long-term view, pensions are a powerful tool, combining potential compound investment growth over many years with employer contributions and tax efficiency.”
Sarah Coles, head of personal finance, Hargreaves Lansdown: “After April’s inflation figures made a messy mistake-laden splash, May’s won’t be making waves. After falling to 3.4% - where it would have been a month earlier if the maths had been right - the ripples will barely touch the Bank of England as it deliberates the next move for interest rates. Meanwhile, the mortgages and savings markets could be directed more by the winds of the bond market than they are by the impact of inflation.
The ONS has released inflation figures for May: Consumer price inflation, UK: May 2025 - Office for National Statistics
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