UK inflation rate jumps to 2.1% in May
UK inflation jumped in May due to rising clothing and fuel prices, pushing it ahead of the Bank of England's target , the Office of National Statistics (ONS) has said.
The Consumer Prices Index (CPI) rose 2.1% in May, up from 1.5% in April, beating economists' forecast of a rise of 1.8%.
The largest annual upward contribution to inflation has come from transport costs, according to the ONS.
Core inflation, which excludes the price of food and energy, rose to 2% in the 12 months to May 2021.
On a monthly basis, surging prices for clothing, fuel, recreational goods and meals pushed the rate higher.
These were partially offset by a hefty fall in the prices of food and non-alcoholic drinks, particularly for bread and cereals.
So how will the Bank of England react?
The Bank of England said it expects inflation to hit 2.5% by the end of this year as the economy reopens from COVID lockdowns.
Governor Andrew Bailey says the increase will be temporary and does not require the central bank to scale bank its huge stimulus programmes, which it is expected to leave unchanged on 24 June after its latest meeting.
However, chief economist Andy Haldane said last week that the Bank of England' policymakers faced the "most dangerous moment" since 1992 wen the government removed sterling from the European Exchange Rate Mechanism.
"There is a greater level of uncertainty about prices at present, with a possibility that inflation will turn out to be higher if staff shortages persist, triggering stronger wage rises, while cost increases continue to be passed on to consumers," said Yael Sefin, chief economist to KPMG UK.
"However, with price pressures expected to ease next year and inflation to stabilises around 2.0%, it is likely that the Bank of England will hold fire and not raise interest rates before 2023."