Key Takeaways
- Experts expect a sharp increase in UK CPI inflation when data for May is released on June 17.
- Energy and food costs remain in focus despite inflation surprising to the downside in April’s data.
- The Bank of England is not expected to hike interest rates.
Even as stock markets rise on optimism over a US-Iran peace deal, UK inflation data is still expected to show the impact of that conflict when the Office for National Statistics releases its latest bulletin on June 17.
Inflation is expected to be above the 2.8% recorded in April. A Bloomberg survey of economists has the Consumer Prices Index at an average of 3% for May, with individual forecasts ranging as high as 3.2%. FactSet consensus also puts CPI inflation at 3% and core inflation at 2.6%.
“Investors were pleasantly surprised last month when inflation didn’t jump quite as high as economists had been warning,” says Morningstar chief European market strategist Michael Field.
“The direction of travel is clear though, and May’s number is very likely to be north of 3% this time around. What investors are banking on, though, is short-lived inflation. If higher levels of inflation persist into later in the year, then that could well be enough to turn market sentiment negative.”
Futures markets, having previously priced in as many as three rate hikes by the Bank of England, now expect no changes because of falling oil prices in June and the expectation of a peace deal in the Middle East. So far, the Bank has held rates at 3.75% during the crisis, whereas the European Central Bank hiked rates on June 12 and raised its inflation forecasts.
The Bank delivers its next rates decision on Thursday, June 18. Its latest inflation attitudes survey, released quarterly, reveals that Britons expect inflation to rise to 4% this year, an increase from the 3.2% expected when the survey was last conducted.
Why Are Prices Rising in The UK?
Oil prices surged as a result of the Iran war, forcing policymakers across the world to revise expectations for inflation, energy costs, food prices, and gross domestic product growth.
In the UK, the inflationary impact of the war has been moderate so far—apart from the sudden increase in petrol and diesel prices—but that’s thanks in part to energy regulator Ofgem’s energy price cap, from April to the end of June. Last month, Ofgem announced the cap would increase by 13% for the period from July 1 to Sept. 30 this year, to £1,659 for a typical domestic household, a change the regulator says is the result of “continued volatility in global energy markets.”
Food prices and supply continue to be a central concern of the government, which is mulling suspending tariffs on agricultural and food products to help reduce food prices. Increases in food and drinks costs played a big role in rising inflation last summer. By April this year, food and non-alcoholic beverage prices had risen 3% over 12 months—down from 3.7% in the 12 months to March.
However, the Bank of England has said it expects food inflation will likely rise to 7% by the end of 2026 because of the rising cost of energy, fertilizer, and transport. The Food & Drink Federation, an industry body, expects that figure to be 9%.
“The scale and depth of crisis depends on how long the Strait of Hormuz remains closed,” its chief economist Liliana Danila says.
Will The Bank of England Increase Rates on June 18?
The Bank of England is not expected to raise interest rates, but the voting pattern of its Monetary Policy Committee will be closely watched when it meets this week. In particular, chief economist Huw Pill, who previously voted to increase rates in April, may lean that way once more.
“How MPC members vote and whether more join the hike camp will be an important indicator of what’s to come,” says AJ Bell’s head of financial analysis Danni Hewson.
“Rate setters will be under intense pressure to maintain a balance to prevent inflation staying higher for longer while being careful not to nudge the already fragile UK economy into a technical recession.”
When Are the Next UK Inflation Releases?
- June 17, 2026
- July 22, 2026
- Sept. 16, 2026
- Oct. 21, 2026
- Nov. 18, 2026
- Dec. 16, 2026
