UK Inflation Holds Steady at 2.8% — What It Means for Your Bills

Good news on the inflation front: the cost of living isn’t rising as quickly as experts feared. Inflation stayed flat at 2.8% in May, when many predicted it would jump to 3%.

The surprise came from a slowdown in food prices. Meat, dairy and vegetables all cost less than they did a month ago, and food inflation fell from 3% in April to 2.2% in May — the slowest rate since December 2024. If you’ve noticed supermarket prices easing slightly, this is why. The British Retail Consortium confirmed the supermarket sector remains highly competitive, though they warned food inflation may rise again in the coming months.

However, there’s a catch. While food got cheaper, transport costs shot up. Petrol is now 24.6% more expensive than a year ago, and airfares and vehicle taxes also pushed inflation higher overall. Transport inflation reached 6.8% — its highest rate since December 2022. If you drive or fly regularly, you’ll have felt this squeeze.

There’s also an energy wildcard to watch. Heating oil prices fell recently, but the real test comes in July when energy price cap decisions kick in. Experts warn that higher oil prices from the Middle East conflict are still filtering through to bills, so don’t expect energy costs to drop anytime soon.

The big question now is whether the Bank of England will cut interest rates. Interest rate decisions matter because they affect mortgage costs, savings rates, and borrowing. The Bank meets on Thursday and most economists expect rates to stay at 3.75%, but the steady inflation figures “strengthen the case” for holding rates, according to KPMG.

The Bank’s target is to get inflation down to 2%, so we’re still a little above where they want it. But the slowdown in food prices is genuinely good news for household budgets, even if transport and energy remain costly.

Keep an eye on the Bank of England’s announcement on Thursday — it could affect your mortgage or savings account. If you’re struggling with rising bills, contact StepChange or Citizens Advice for free support with budgeting and debt.