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UK inflation fell to 3.4% in May, in line with economists’ expectations, offering fresh evidence that price pressures may be starting to ease as the Bank of England prepares to announce its latest interest rate decision.

The drop comes after inflation hit a 14-month high of 3.5% in April, driven by a wave of household bill increases. However, the Office for National Statistics (ONS) said an error in vehicle tax data meant April’s inflation rate should have been 3.4%. Despite the mistake, the ONS has not issued an official revision.

Core inflation, which excludes food and energy, also softened, falling from 3.8% to 3.5% — again matching forecasts.

The statistics office said transport prices rose by 0.7% in the 12 months to May, down from 3.3% in the 12 months to April, reflecting drops in air fares (which jumped in April) and petrol prices, together with the correction of the error in vehicle excise duty prices.

The latter was overstated in April and the series corrected from May. As is standard practice, the April figure has not been revised, the ONS said.

Fuel prices provided further relief for households. The average price of petrol dropped by 2.1p between April and May to 132.4p per litre, compared with 148.8p in May 2024. Diesel prices fell 2.6p to 139.1p per litre, down from 156.3p a year earlier.

ONS acting chief economist Richard Heys said: “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.

“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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Food and non-alcoholic drink prices picked up. Inflation in this category rose to 4.4% in the 12 months to May, up from 3.4% in April — the highest rate since February 2024, when it stood at 5%.

The ONS said that the prices of chocolate, confectionery and ice cream rose between April and May but fell between the same months a year ago. It also said that meat prices rose by more this year than during the same period of 2024.

Andrew Wishart, senior UK economist at Berenberg, said: “Stronger food price inflation than forecasters [including the Bank of England] anticipated suggests that grocers have enough pricing power to pass increased staff costs and agricultural prices on to customers.”

Panmure Liberum chief economist Simon French highlighted the fact more than half the goods used to measure inflation rose by more than 3% in May. This was the highest proportion in 15 months.

Rachel Reeves said she knows there is “more to do” as the inflation figure came in well above the Bank of England’s 2% target.

The chancellor said: “Our number one mission is to put more money in the pockets of working people through our Plan for Change.

“We took the necessary choices to stabilise the public finances and get inflation under control after the double digit increases we saw under the previous government, but we know there’s more to do.

“Last week we extended the £3 bus fare cap, funded free school meals for over half a million more children, and are delivering our plans for free breakfast clubs for every child in the country.

“This government is investing in Britain’s renewal to make working people better off.”

The data was released a day before the Bank of England’s Monetary Policy Committee meets, with markets expecting the central bank to keep its benchmark interest rate on hold as it weighs the outlook for inflation.

Pieter Reynders, a partner at McKinsey & Company, said: "May’s marginal dip in CPI to 3.4% marks a correction, not a comeback. After April’s sharp rise to 3.5%, price pressure remains firmly in play.

"Food and non-alcoholic beverage inflation is at 4.4%, its highest rate in 12 months, adding further strain to monthly budgets. While prices of furniture and household goods rose at their highest rate since December 2023."

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The UK continues to register one of the highest inflation rates in the G7. In May, Canada, the US, France, Italy and Germany all recorded inflation rates below the UK’s 3.4%. Data from Japan for May has yet to be released, but inflation there stood at 3.6% in April.

For comparison, inflation in the eurozone — covering countries that use the euro — was just 1.9% in May.

Alice Haine, a personal finance expert at Bestinvest, said: “Consumers feeling buoyed by the latest inflation reading aren’t out of the woods just yet. The cost-of-living crisis has already left its mark on household budgets, with the advent of ‘Awful April’ when a raft of household bills jumped upwards along with stamp duty costs, only adding to the pain.

"Some households still feeling financially squeezed may be hoping for action on rates from the BoE this week to ease borrowing costs further, but they may have to wait a little longer."