Inflation held steady at 3.4% in May, making a cut to interest rates this week less likely.

Figures from Government data provider the Office for National Statistics (ONS) show prices were rising at 3.4% last month. While that’s slightly lower than the 3.5% announced for April, this was incorrectly raised by an error in car tax data, and the correct figure would also have been 3.4%.

Experts said that while it was a relief inflation is no higher, this isn’t enough of a cooling to see rates fall immediately.

Myron Jobson, personal finance expert at DIY investment site Interactive Investor, said: “The latest inflation report is unlikely to be enough for the Bank of England’s rate-setting Monetary Policy Committee to feel confident about cutting borrowing costs when it announces its next interest rate decision tomorrow.

“Essentially, the reasons to hold rates seemingly outweigh those to cut, despite the recent contraction in UK economic growth.”

Fuel down, food up

The figures showed that while the price of air fares and petrol had fallen, small upward pressures on inflation came from clothing, furniture and some food.

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However, tensions in the Middle East have since led to an increase in the oil price. Laith Khalaf, head of analysis at ISA and SIPP provider AJ Bell, said this will lead to upward pressure on inflation next month.

“Meanwhile, the threat posed to the global economy from tariffs remains present, if not quite as enormous as it did two months ago. Then there’s the UK economy, which contracted sharply in April, albeit after a good growth spurt in the first quarter of the year. Add in a weakening labour market, and you have a smorgasbord of mixed messages, which the Bank of England has to make some sense of,” he added.

Sticky inflation hits living standards

Meanwhile, Alice Haine, personal finance expert at investment group BestInvest, said the continuing increased pricing trends are hard for households battling with higher bills.

She said: “The Bank of England expects inflation to ramp back up to a peak of 3.7% in September.

“It’s not only sticky inflation that makes it harder for people to maintain their living standards, households are also grappling with a much higher tax burden, a result of frozen income tax thresholds, which drags people deeper into taxable territory as their pay increases.

“This means many people who have received a pay rise in recent months will have a big slice of that increase gobbled up by inflation and tax and with wage growth now easing, any prospect of interest rates remaining elevated for longer will be a headwind for households weighed down by heavy debts or oversized mortgages.”