UK Inflation Slows to 3.4% in May, Pressures Persist for Households as Bank of England Holds Rates

Inflation Eases, but Relief Feels Distant for Households

The latest figures from the Office for National Statistics bring a hint of relief: consumer price inflation in the UK dipped to 3.4% in May 2025. That's a fraction down from the 3.5% mark in April. At first glance, it might look like things are finally cooling off, but digging deeper, families aren’t exactly feeling much of a break at the checkout, especially when it comes to renting or grabbing a bite out.

Key drivers behind this easing were falling clothing prices—with a monthly drop of 0.6%—and a slower annual rise in recreation and culture costs, slipping to 3.4% from April’s 3.8%. Housing is another area where price rises have eased off slightly, growing at a 1.9% annual pace compared to 2.1% in April. On the flip side, food inflation didn’t budge much at 3.3%. If you drove or dined out recently, you probably noticed those bills edging higher, with both transport and restaurant prices nudging up last month.

When you strip out the volatile essentials—energy, food, alcohol, and tobacco—core inflation stuck at 3.5%. Services inflation, a major pain point for many, stayed stubborn at 5%. The bottom line? While the top-line number improved, UK inflation isn’t moving decisively in the right direction for the things hitting households hardest. There’s still a gap between what families experience and the official stats.

Bank of England Stays on Guard as Outlook Remains Uncertain

This softening of inflation sparked plenty of speculation ahead of June’s interest rate decision. In the end, the Bank of England chose to keep its main rate steady at 4.25%. The vote wasn’t totally united: most members backed a hold, but three argued for a quarter-point cut, showing just how finely balanced the debate has become.

Central bankers pointed to signs that things are stabilizing—price rises aren’t running away, and wage growth is starting to cool. But they’re not declaring victory yet. Sticky services inflation is still hitting pay packets, and the rental market is leaving tenants under pressure across the country. Plus, the Bank’s own forecasts predict that inflation might head back up to 3.5% by autumn before taking a long journey down to somewhere near 2% by 2027.

Behind the caution is a weak economy. The UK’s GDP growth remains sluggish, and the job market is loosening up, meaning the risk of a sharp wage-price spiral has faded for now. But businesses and households waiting for a meaningful drop in rates are left hanging a bit longer. For renters and anyone who relies on services, that pain won’t ease up overnight.

Looking at the bigger picture, families are still feeling squeezed. Rent has been one of the heaviest monthly expenses, especially with supply tight in many areas. Factor in elevated prices for services—from childcare to car repairs—and it’s easy to see why many people don’t yet feel that the worst is over, even if the headline inflation figure is lower than last year.

For now, the focus stays on the Bank's next moves and whether hints of economic slack will finally turn into a proper break for stretched households. It might take a while before shops, landlords, and service providers reflect those headline numbers in real prices at the tills and the rent books.