The latest price inflation figures show the Consumer Prices Index (CPI) measure of inflation remaining steady at 4.5% for the year to May 2011.
The Retail Prices Index (RPI) measure of price inflation, which excludes mortgage and housing costs, also remained unchanged from the previous month, at 5.2%.
Fuel and food prices were the largest contributors to this continued higher than target price inflation.
Both elements increased by 1.3% during May.
These latest figures mean that the Bank of England has continued to overshoot its inflation target of 2%. It has failed to hit this CPI target for 34 of the past 40 months.
The Bank is expecting to see price inflation go even higher over the next quarter, with their central forecast seeing it rise to 5%.
This is still unlikely to result in higher interest rates, until next year at least. The UK economy remains in a fragile state of recovery and higher interest rates now could easily derail any part of the recovery led by consumer spending.
Higher interest rates are also unlikely to help bring inflation back under control. Much of the contribution to these above average inflation levels comes from temporary and exported factors.
When the VAT increase to 20% from January falls out of the calculation next year, this will help to ease pressure on inflation.
Food and fuel prices are largely imported, so higher domestic interest rates in the UK will do little to ease these inflationary pressures.
Our experiences of price inflation will differ based on the specific goods and services we choose to purchase.
These monthly figures provide a useful insight into average inflation figures, but the level of inflation you consider when setting your financial plan should be based on your personal experiences and expectations.
Photo credit: Flickr/Adrián Pérez
