UK May CPI +2.0% vs +2.0% y/y expected

• Prior +2.3%
• Core CPI +3.5% vs +3.5% y/y expected
• Prior +3.9%

The readings are in line with estimates, with the monthly figures showing a 0.3% increase in headline inflation and 0.5% increase in core inflation. Despite the headline reading touching the crucial 2% mark, core annual inflation remains high at 3.5%. And the more worrying detail is that services inflation is keeping on the high side at 5.7% (although lower than the 5.9% reading in April).

The report here will not change expectations going into the BOE tomorrow and I would not expect the central bank to alter their language either. Core prices and services inflation are still two stubborn points, so it would be prudent not to call out any significant progress on the inflation front just yet.

GBP/USD is little changed on the data, continuing to hold at around 1.2710 currently.

This article was written by Justin Low at www.forexlive.com.