IoD press release Inflation steadies, but conflict escalation adds more uncertainty
Commenting on today’s data from the Office for National Statistics that showed the annual rate of CPI inflation holding at 3.4% in May 2025, unchanged from the corrected 3.4% April rate, Anna Leach, Chief Economist at the Institute of Directors, said:
“There were few surprises in today’s inflation data, as the impact of the OfGem price cap rise, other regulated price increases and the passthrough from higher employment costs continues to keep inflation outside the target range. Inflation is expected to remain elevated in the months ahead due to these factors. Meanwhile volatility in transport data, exacerbated by an error in the VED data, has unwound this month, and services inflation has fallen back in line with the Bank of England’s expectations.
“Price expectations amongst businesses and households remain uncomfortably high, but downside risks to growth are increasing. Despite some recovery, the overall confidence of business leaders in the economy remains significantly down on a year ago following a damaging Budget for business and a sharp rise in tariff uncertainty. A chunky decline in goods trade with the US in April underscores the UK’s exposure to trade risk. Meanwhile developments in the Middle East are driving volatility in oil prices, which may prove inflationary. The MPC has a difficult balance to strike in guiding inflation down to target sustainably, and odds remain for a hold in the forthcoming MPC decision.”
