Reactions to latest inflation figures

British Chambers of Commerce

Responding to the latest inflation data, published by the ONS this morning, David Bharier, Head of Research at the British Chambers of Commerce said: 

“Inflation easing slightly to 3.4% in May was widely expected, but this elevated level remains a real concern for businesses and confirms that price pressures persist.   

“Our research shows that firms' price expectations jumped after the Autumn Statement, which included the increase in employer NICs, and again following the US tariff announcement. Taxation is now the most cited concern among firms. 

“In the short term, there are some clear headwinds. The recent escalation between Israel and Iran poses a significant risk to global supply chains. Any major disruption in the Strait of Hormuz could echo the supply chain shock of 2021, with surging oil and shipping costs. Many smaller businesses will have little capacity to absorb these pressures. 

“The mounting uncertainty makes it more likely that the Bank will hold the interest rate at 4.25% tomorrow. Nevertheless, a path towards further rate cuts will be greatly welcomed by firms to get borrowing costs down. But other steps are needed to alleviate cost pressures, including a plan to ease the tax burden businesses face, and further reductions in trade friction between both the EU and USA.” 

High interest rates not the answer to stubborn inflation, warns TUC  

TUC calls on Bank to resume cutting interest rates ahead of Thursday's MPC decision 

Commenting on CPI inflation slightly dipping to 3.4% in the year to May 2025, TUC General Secretary Paul Nowak said:  
“As the international picture gets more turbulent with every passing day, global uncertainty alongside increased energy and water costs are keeping prices high.   

“High interest rates just make cost pressures worse and are not the answer to stubborn inflation. Instead, lower rates are needed to help ease the pressure on households, businesses and government borrowing.   

“The Bank of England must do the right thing and resume cutting interest rates this week.   

“This will put more money in people's pockets, enhance businesses' ability to grow, and make sure our public services can thrive.” 

Conservative response to inflation figures

Sir Mel Stride MP, Shadow Chancellor of the Exchequer, said:

"This morning's news that inflation remains well above the 2 per cent target is deeply worrying for families.

"Labour's choices to tax jobs and ramp up borrowing are killing growth and stoking inflation – making everyday essentials more expensive.

"To plug the hole they have created, we now know Rachel Reeves has a secret plan to raise taxes. Make no mistake – more taxes are coming."

ENDS

Notes to editors:

• Higher spending is increasing the size of the state to record highs. Under Labour's plans, Total Managed Expenditure is projected to reach 45 per cent of GDP in 2025–26 – the highest level seen outside the pandemic since 2010 (OBR, Economic and fiscal outlook, 26 March 2025, link).

• Higher borrowing is risking the long-term security of our public finances. According to the Office for Budget Responsibility (OBR), public sector net debt is expected to reach 96.1 per cent of GDP by 2029-30 - the highest level seen outside the pandemic since 2010 (OBR, Economic and fiscal outlook, 26 March 2025, link).

• Growth is being killed. In March, the Office for Budget Responsibility (OBR) halved its forecast for growth this year. Its October forecast said growth would be 2.0 per cent – they are now forecasting it will be 1.0 per cent in 2025 (OBR, Economic and fiscal outlook, 26 March 2025, link).

• Paul Johnson, Director of the IFS, said any downgrade in the Office for Budget Responsibility (OBR) forecasts ahead of the Autumn Budget will ‘almost certainty spark more tax rises'. JOHNSON: ‘Ms Reeves is now going to have all her fingers and all her toes crossed, hoping that the OBR will not be downgrading their forecasts in the Autumn. With spending plans set, and 'ironclad' fiscal rules being met by gnat's whisker, any move in the wrong direction will almost certainly spark more tax rises' (Steven Swinford, Twitter, 12 June 2025, link).

• Rachel Reeves said ‘taxes won't need to go up to pay for what is in the spending review' heavily implying that tax rises are to come to pay for future spending. STUIDO: So you can't say if taxes will go up in the autumn' REEVES: ‘Well, taxes won't need to go up to pay for what is in this spending review. Now, I'm not going to write four years' worth of budgets within the first year of this government. But we took the action that was necessary last year to put our public finances on a firm footing and put that immediate injection of cash into our public services. And we've allocated the funding for day-to-day spending for the next three years and for capital spending for remainder of this Parliament' (GB News, 11 June 2025. archived).

• Rachel Reeves has a ‘secret plan to raise taxes'. According to The Telegraph, ‘The Chancellor of the Exchequer's officials are understood to have drawn up a menu of tax increases, including a raid on dividends suggested by Angela Rayner in a leaked memo' (The Telegraph, 15 June 2025, link).

Inflation data: time for immediate government measures to lower household energy bills, says IPPR

IPPR has reacted to this morning's ONS data release of CPI data for May 2025, which showed inflation fell slightly to 3.4 per cent, from 3.5 per cent in April. 

Carsten Jung, associate director for economic policy at IPPR, said: 

"Inflation in May was in line with expectations and services inflation was slightly below expectations. This and a cooling jobs market should prompt the Bank of England to cut interest rates sooner, easing the burden on businesses and households. 

“A key driver of persistent inflation is the cost of energy, which rose in April and is set to remain elevated. Energy prices stand some 60 per cent above pre-crisis levels. Our heavy dependence on gas leaves the UK extraordinarily vulnerable to such shocks, so weaning the country off it is the best way to strengthen resilience. 

“But the government could and should do more to reduce the cost of living for households immediately. For instance, rebalancing energy bills to lower electricity prices compared to gas, helping households with energy debt and regulating the additional fees charged to consumers could all provide prompt relief - and demonstrate that ministers are proactive in tackling the cost of living.” 

IoD: Inflation steadies, but conflict escalation adds more uncertainty

Commenting on today's data from the Office for National Statistics that showed the annual rate of CPI inflation holding at 3.4% in May 2025, unchanged from the corrected 3.4% April rate, Anna Leach, Chief Economist at the Institute of Directors, said:

“There were few surprises in today's inflation data, as the impact of the OfGem price cap rise, other regulated price increases and the passthrough from higher employment costs continues to keep inflation outside the target range. Inflation is expected to remain elevated in the months ahead due to these factors. Meanwhile volatility in transport data, exacerbated by an error in the VED data, has unwound this month, and services inflation has fallen back in line with the Bank of England's expectations.

“Price expectations amongst businesses and households remain uncomfortably high, but downside risks to growth are increasing. Despite some recovery, the overall confidence of business leaders in the economy remains significantly down on a year ago following a damaging Budget for business and a sharp rise in tariff uncertainty. A chunky decline in goods trade with the US in April underscores the UK's exposure to trade risk. Meanwhile developments in the Middle East are driving volatility in oil prices, which may prove inflationary. The MPC has a difficult balance to strike in guiding inflation down to target sustainably, and odds remain for a hold in the forthcoming MPC decision.”