UK inflation rate expected to rise as May 2026 figures loom over Bank of England decision

The UK’s brief reprieve from climbing prices appears to be over. The Office for National Statistics is set to publish May 2026 Consumer Price Index data on June 17, and the consensus view among economists is that inflation is heading back up, with forecasts clustering around 3.0% year-over-year.

That would mark a meaningful reversal from April’s 2.8% reading, which itself was a welcome decline from 3.3% in March. The timing could hardly be more consequential: the data drops just one day before the Bank of England’s monetary policy meeting and interest rate decision.

What’s pushing prices higher

Ongoing tensions in the Middle East, particularly the US-Israel conflict with Iran, have been pushing global fuel and energy costs upward. That pressure is now filtering through to UK consumer prices in a way that reverses the temporary moderation seen in April.

The energy price cap and favorable base effects from a year prior helped pull the April headline number down. Those tailwinds have faded.

Some forecasts put the May figure as high as 3.2%, though the central expectation from Bloomberg and FactSet surveys sits closer to 3.0%. Core inflation, which strips out volatile food and energy components, is expected to come in around 2.6% for May.

The ONS will release the CPI data alongside producer price indices at 7:00am UK time.

The Bank of England’s inflation headache

The Bank of England revised its near-term CPI inflation projection to 3.3% for the third quarter of 2026, with expectations that price growth will continue accelerating into the final quarter of the year.

The Bank had been on a cautious easing trajectory earlier in 2026, with markets pricing in gradual rate cuts as inflation appeared to be cooling. A confirmed move back above 3.0% would likely push rate cut expectations further into the future, keeping borrowing costs elevated for households and businesses alike.

What this means for investors

Bond markets face the most immediate pressure. Higher inflation erodes the real returns on fixed-income assets, and if the Bank of England signals it will hold rates steady or even consider tightening, gilt yields could move higher.

Sectors tied to energy and commodities could see relative outperformance. Transportation and manufacturing face margin compression from higher input costs.

If May confirms a reversal back toward 3.0% or higher, and the Bank of England’s Q3 projection of 3.3% proves accurate, the UK faces a second half of 2026 defined by persistent inflation and cautious monetary policy.

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