Figure undermines call for rates to be lowered
UK consumer price inflation remained steady at 1.9 per cent in May, dashing retailers' hopes that interest rates will be reduced from 4.75 per cent.

The inflation rate, from the Office for National Statistics, has not hit 2 per cent since 1998.

The trend has caused analysts to forecast that interest rates are likely to remain at the same rate for the rest of the year and may even go up.

However, Capital Economics chief UK economist Jonathon Loynes noted that the static rate of inflation was down to more erratic components, such as food and airfares, rather than any consistent rising inflation in core sectors.

He said: 'The fact that clothing and footwear inflation fell from -5.2 per cent to -5.5 per cent, while household goods and furniture inflation remained at -1 per cent, suggests that the downward pressure on high street goods prices remains as strong as ever.'

Joynes said he expected inflation to fall to 1.5 per cent by the end of the year, after topping 2 per cent. As a result, he forecasts that interest rates will drop to 4 per cent by the end of the year and to 3.5 per cent next year.

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