Finance: Inflation jumped more than expected in May as Brexit continues to bite

CPI — the key measure of inflation — rose to 2.9% in May, up from 2.7% in April.

LONDON — UK inflation climbed even higher in May as a weak pound continued to push up the prices of everyday goods and services.

The Office for National Statistics said in its latest release that the UK's Consumer Prices Index (CPI) inflation rate — the key measure of inflation — rose to 2.9% in May, up from 2.7% in April.

Economists forecast a 2.7% rate before the release.

CPI measures the weighted average of prices of a basket of goods and services, such as food, transportation, and medical care.

CPIH, a measure which includes costs associated with maintaining a home — and which the ONS cites as a more useful indicator of living costs than CPI — climbed to 2.7% in May. That figure was up from 2.6% in April, and its highest level since April 2012.

The ONS said that rising prices for recreational and cultural goods and services (particularly games, toys and hobbies) was the main contributor to the increase in the rate.

The chart below illustrates the sharp rise in inflation following last year's Brexit vote. OOH represents ower occupiers' housing costs, which measures the cost of owning, maintaining, and living in one's own home.

CPIH, OOH component and CPI 12-month rates for the last 10 years: May 2007 to May 2017

The sharp fall in the value of the pound following the UK's vote to leave the EU last year has raised the cost of imports and pushed up the rate of inflation.

Bank of England governor Mark Carney has warned of a "challenging time" for British households as wage growth stagnates and fails to keep up with the increase in the price of goods and services.

CPI — the key measure of inflation — rose to 2.9% in May, up from 2.7% in April. Read Full Story