MNI UK CPI Preview: May 2025

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• Ahead of the publication of the MPC policy decision on Thursday, May CPI data will be published on Wednesday at 7:00BST (although the MPC will already have advance access to the data as of Monday morning).
• The ONS' VED (road tax) component error in the April dataset which boosted headline CPI by around 0.13ppt (on our calculations core by 0.16ppt and services CPI by 0.25ppt) will be reversed in the May data.
• Headline CPI was also boosted in April by Easter effects: air fares contributed 0.11ppt to the increase, package holidays 0.07ppt and sea transport 0.04ppt. These combined are therefore over 0.2ppt and along with the VED a fully reversal would see headline CPI drop by almost 0.4ppt and services CPI by almost 0.8ppt.
• The MNI median looks for a smaller fall to 3.3%Y/Y for headline (from 3.53%, 3.40% adjusted for VED) and for services to 4.8%Y/Y (from 5.42%, 5.17% adjusted). The BOE forecasts are 3.36% and 4.73% respectively. We see risks skewed more to the downside for services.
• However, there are upside risks to core goods (albeit resulting in a smaller downside surprise to the BOE) and food prices.