Inflation eased to an annual rate of 3.4% in May, according to official figures released this morning, but the Bank of England is widely expected to leave interest rates on hold despite that.
The Office for National Statistics (ONS) reported the consumer prices index measure eased from 3.5% the previous month.
It said that despite upwards pressure on prices from food and clothing, the decline was driven by falls in airfare prices following Easter.
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The headline figure also reflected a small downwards correction to ONS inflation data ahead of April related to vehicle excise duty calculations.
ONS acting chief economist Richard Heys said: “A variety of counteracting price movements meant inflation was little changed in May.
“Air fares fell this month, compared with a large rise at the same time last year, as the timing of Easter and school holidays affected pricing. Meanwhile, motor fuel costs also saw a drop.
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“These were partially offset by rising food prices, particularly items such as chocolates and meat products. The cost of furniture and household goods, including fridge freezers and vacuum cleaners, also increased.”
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Forecasts suggest that inflation will tick up over the second half of the year – with effects from Donald Trump’s trade war and rising commodity costs amid events in the Middle East among the concerns ahead for the Bank of England.
It has adopted a “careful” and “gradual” approach to interest rate cuts as a result.
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That is despite weakening employment data, reported earlier this month, which showed a tick up in the official jobless rate and a 109,000 reduction in payrolled employment.
Other elements of the inflation data are also supportive of an argument for rate cuts.
Core CPI inflation – a measure that strips out volatile elements such as energy and food – eased from 3.8% in April to 3.5% while services inflation tumbled sharply to 4.7% from 5.4% the previous month.
Nevertheless, the Bank is widely expected to leave Bank rate on hold on Thursday following the June meeting of its rate-setting committee.
LSEG data showed after the inflation data that financial markets currently see two more interest rate cuts by the year’s end.
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Risks to prices ahead will come from a sustained Israel-Iran war pushing up oil and gas prices but there have been different views among policymakers over whether the trade war will result in inflation or not.
As such, the minutes of the Bank’s meeting will be closely scrutinised for hints on whether rate cut caution is easing.
