UK inflation unexpectedly stays at 2.8% with higher transport costs offset by slower food price rises

By Julia Kollewe • June 17, 2026 • Business

Food prices rose at the slowest rate since December 2024

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. It’s inflation day in the UK! The annual inflation rate unexpectedy stayed at 2.8% last month, as the impact of the Iran war was not as bad as feared. The figures were released by the Office for National Statistics. Economists had expected a rise to 3%. Last month, the annual growth rate slowed to 2.8%, as lower energy bills announced by the chancellor at the lasts budget too effect. Higher transport prices, from air fares, fuel and sea fares, were offset by a slowdown in the pace of price increases for food. Food prices rose by 2.2% in the 12 months to May down from 3% in April, and marking the lowest rate since December 2024. Inflation remains above the government’s 2% target set for the Bank of England, but it is expected to keep interest rates on hold at its meeting on Thursday, to assess the impact of the Iran war. Economists hope the agreement reached between Donald Trump and the Iranian regime at the start of the week will lead to the reopening of the strait of Hormuz, which has driven oil prices sharply higher since late February, with knock-on effects for a wide range of materials and goods. Oil prices continue to fall, and are currently down 0.7% to $78.4 a barrel for Brent crude. West Texas Intermediate dropped 0.8% to $75.41 a barrel. Both benchmarks fell about 5% for a second day on Tuesday to three-month lows, amid optimism around the peace agreement. Asian markets were mostly higher, and Japan’s Nikkei hit another record high, despite its central bank raising interest rates. The benchmark stock index rose 0.76% to 69,943, after trading above 70,000. The US Federal Reserve is also expected to leave interest rates on hold at its meeting tonight. The Agenda 9.30am BST: UK House prices and rents 10am BST: Eurozone inflation final for May 1.30pm BST: US retail sales for May 7pm BST: US Federal Reserve interest rate decision (no change expected)

Source: The Guardian