Inflation Drops To 3.4% In May
- News
- Published: 15 Jun 2010 in Money and General
Inflation fell to 3.4% in May despite motorists paying record prices for petrol, figures have shown.
The Consumer Prices Index (CPI) fell back from 17-month highs during the month and beat City expectations of 3.5% even though UK motorists are paying more at the pump than ever.
According to new figures from the Office for National Statistics, petrol prices rose 0.3p to a record high of 120.5p in May, but overall inflation fell because motorists were hit by even steeper price hikes a year earlier.
The unexpected drop will be welcomed by the Bank of England's rate-setters who have been fretting over rising prices in the wake of the recession.
Governor Mervyn King said inflation should fall back to the Bank's target of 2% within the year as a laboured recovery keeps prices down. But a possible VAT increase in Chancellor George Osborne's emergency Budget could heap pressure on inflation even sooner.
The Bank's latest survey on inflation attitudes last week showed average expectations for the year ahead putting the cost of living at 3.3% - up from 2.5% in February.