Investment - Articles - Inflation comes in lower than expected at 2.8% in May

Mike Ambery, Retirement Savings Director at Standard Life plc said: “Today’s unchanged 2.8% inflation reading may offer some relief to many across the UK, with a rise to 3% broadly expected. That said, the figure still sits above the Bank of England’s 2% target, and many households will continue to feel the strain. The recent US-Iran truce could help ease pressure on oil prices later this year if it holds, but with the July energy price cap change on the horizon, household bills are likely to stay under pressure over the summer.

 

“This context makes tomorrow’s Bank of England decision especially important. Rates are widely expected to be held at 3.75%, but the outlook from here is less straightforward as policymakers balance signs of a softer labour market against the risk of persistent above-target inflation. While a sustained easing in global pressures could reduce the need for further tightening, the Bank will be watching the data closely.

 

“For households and those planning for retirement, the squeeze may not ease quickly. Just because the figure has not increased month on month, prices are still rising, and over time that can steadily reduce spending power, particularly for people approaching retirement. When essential costs rise, pension contributions can feel like an easy place to cut back, but doing so can mean missing out on tax relief, employer contributions and potential investment growth. Where affordable, keeping contributions going, or restarting them when possible, can help people stay on track.”