Britons received an unexpected boost this morning after inflation held steady at 2.8 per cent in May, defying forecasts that price pressures would begin accelerating once again.
Fresh figures released by the Office for National Statistics (ONS) showed the Consumer Prices Index (CPI) remained unchanged from April, surprising City economists.
It was widely anticipated there would be a rise towards three per cent, with some forecasts predicting inflation could climb as high as 3.2 per cent.
The latest reading means inflation remains above the Bank of England’s two per cent target, although the stability will provide some reassurance to households and policymakers concerned about the impact of rising global tensions on living costs.
‘We are on a knife edge’: Farmers warn food prices will rise despite inflation holding at 2.8 per cent
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Policymakers at the Bank of England are due to meet on Thursday to decide whether interest rates should be adjusted in response to the latest economic conditions.
May’s figure follows a notable fall in April, when inflation dropped from 3.3 per cent in March to 2.8 per cent, marking its lowest level in more than a year.
That decline was largely driven by lower household energy bills after Ofgem implemented a seven per cent reduction to its energy price cap.
The cut delivered savings of around £10 per month for a typical household using both gas and electricity.
While inflation has fallen significantly from the highs recorded in recent years, it continues to sit above the Bank of England’s preferred level.
However, concerns remain that higher food prices could begin feeding into inflation later this year as the impact of disruption to global supply chains becomes more pronounced.
British farmers have warned that rising costs are becoming increasingly difficult to absorb following months of disruption linked to the Iran conflict.
Hampshire farmer Al Brooks told the BBC that fertiliser costs had risen by “45 per cent or more” because of restrictions affecting shipping routes through the Strait of Hormuz.
Mr Brooks said: “We are on a knife edge with what we’re doing.”
He explained that many farming businesses have already been forced to purchase supplies for future seasons at significantly higher prices.
Mr Brooks also warned that prices may not quickly return to previous levels even if tensions ease, arguing that the recent volatility had been “so sharp” that opportunities to secure lower costs had effectively disappeared.
Some agricultural producers are now questioning whether certain crops remain financially viable to grow under current conditions
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Industry figures believe the effects of the conflict are only beginning to work their way through supply chains and could place additional pressure on household budgets in the months ahead.
The cost of food, fuel and energy remains particularly vulnerable to disruption in global shipping markets.
Financial markets have reacted positively to signs of progress towards a potential agreement between Washington and Tehran aimed at ending hostilities.
Investors hope any resolution would allow key supplies to move more freely through the Strait of Hormuz, one of the world’s most important shipping routes.
However, economists have cautioned that the impact of previous disruption may continue to affect prices even if conditions begin to improve.
Recent inflationary pressures have largely been driven by higher costs in the services sector, alongside increases in air fares and vehicle duty.
Analysts will now be watching closely to see whether inflation remains stable through the summer or begins to rise as higher costs feed through the wider economy.