UK Inflation Briefing (May): Lower forecasts, but don’t write off the risks

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UK Inflation Briefing (May): Lower forecasts, but don’t write off the risks

17 June 2026

UK Inflation Briefing (May) EconomicsUnited Kingdom

Lower forecasts, but don’t write off the risks

◆ UK CPI inflation was steady at 2.8% y-o-y in May as higher Chris Hare

transport costs were offset by contained prices elsewhere Senior Economist, Eurozone, UK and Ireland HSBC Bank plc

chris.hare@hsbc.com

◆ Given downside data news and energy price falls, we lower +44 20 7991 2995

our CPI forecast – it now peaks at 3.6% in Nov (vs. 4.1%) Emma Wilks

UK Economist

HSBC Bank plc

◆ While energy and second-round effect risks are still on the emma.wilks@hsbc.com

table, the MPC might feel (even) less inclined to raise rates +44 20 3268 5948

Dovish data and lower energy prices

UK CPI inflation was unexpectedly unchanged in May, at 2.8% y-o-y (consensus 3.0%).

While higher energy prices might have contributed to an uplift in air fares, price pressures

across much of the rest of the basket, including food and core goods, were comfortably

contained. In other news, of course, global energy prices have fallen sharply in the wake

of a US-Iran deal which should lead to the reopening of the Strait of Hormuz.

Lowering our forecasts, but upside risks linger

Mostly on account of lower energy prices, we significantly lower our near-term base case

for inflation. With oil prices currently at c.USD80/bbl pump prices will fall by around 2.5%

in June and by 5.5% in July, while lower gas prices could mean that utility bills will fall

gently from October. Taken together alongside the 0.1ppt downside news to our May CPI

forecast, we now forecast November peak inflation at 3.6% (4.1% previously). But we

maintain our end-27 CPI forecast at 2.3%.