Fitch: Inflation data will encourage the Bank of England

Jessica Hinds of the Fitch Ratings economic team said that with overall inflation rates staying at 2.8% in May and oil prices falling this week, UK central bank policymakers will likely be confident in keeping interest rates unchanged. She stated in a report that there are little signs that the rise in energy prices has pushed up the costs of other goods. Indeed, the 13% increase in the Ofgem price cap next month is expected to raise overall inflation in the second half of the year. "However, the significant drop in oil prices this week, if sustained, will prevent further increases in inflation expectations," Hinds said, adding that alongside a weak labor market, this means the Bank of England may keep interest rates unchanged until the end of 2026, and then resume cutting rates in 2027.