UK Inflation Persists Above Target, Chancellor Proposes National Insurance Hike
UK inflation exceeds the Bank of England's 2% target, prompting interest rates to stay at 4.25%. Chancellor Reeves proposes National Insurance increases to combat rising costs.
Overview
- UK inflation is currently above the Bank of England's target of 2%, impacting economic policies.
- Interest rates are expected to remain steady at 4.25% due to persistent inflation.
- Chancellor Rachel Reeves announced a plan to increase employer National Insurance payments.
- The proposed National Insurance hike aims to raise £25 billion to address inflation and living costs.
- The government's focus is on tackling inflation while managing the economic challenges faced by citizens.
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"…Chocolate prices in the UK rose at the fastest pace on record in May as the overall cost of food continued to climb, official figures suggest."
BBC News·1M·FAQ
As of May 2025, the UK inflation rate measured by the Consumer Prices Index (CPI) is 3.4%, which is above the Bank of England's target of 2%. This marks a slight decrease from 3.5% in April but remains persistently above the target level.
Chancellor Rachel Reeves has proposed increasing employer National Insurance payments as a measure to raise £25 billion to help combat rising inflation and the cost of living challenges faced by UK citizens.
The Bank of England expects inflation to rise further to 3.7% by September, prompting it to keep interest rates steady at 4.25% to manage ongoing inflationary pressures and avoid destabilizing the economy.
Recent inflation trends are influenced by slowing transport inflation, which has offset rising prices in furniture, household goods, and food. However, concerns remain about potential increases due to geopolitical conflicts in the Middle East pushing energy prices higher.
Housing and household service costs inflation was at 6.9% in May 2025, which is slightly down from 7.0% in April, indicating that these costs are rising faster than the overall CPI but showing a modest slowdown.
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