Inflation in Britain held at a 2-1/2 year high in May as rising food prices balanced a drop in travel costs, providing little comfort for the Bank of England which expects inflation to hit 5 percent later this year. The Office for National Statistics said consumer prices rose 0.2 percent last month, keeping the annual inflation rate at 4.5 percent, as expected.
Tuesday's steady reading follows an unexpectedly strong jump in April, when travel providers and airlines ramped up prices in the run-up to Easter and the extra holiday for Britain's Royal Wedding. Core inflation dropped to 3.3 percent from April's record high of 3.7 percent, also reflecting lower transport costs, particularly airfares.
The retail price inflation gauge, which includes more housing costs and is the benchmark for many wage deals also held steady at 5.2 percent, as expected. Inflation has been above the Bank of England's 2 percent target for 1-1/2 years and the Bank said in its inflation report that the annual rate may hit five percent later this year. Utility companies have announced further price rises for heating and energy.