The Consumer Prices Index (CPI) measure of inflation remained flat at 8.7% in the 12 months to May, defying expectation of a drop to 8.4%.

On a monthly basis, CPI rose 0.7% and according to the Office for National Statistics (ONS), core CPI which excludes energy, food, alcohol and tobacco rose by 7.1%, up from 6.8% in April. This is the highest rate since March 1992.

The ONS noted that rising prices for air travel, recreational and cultural goods and services, as well as second-hand cars resulted in the largest upward contributions to the monthly change.

Live music concert tickets, games, toys, hobbies and package holidays helped push up inflation, but was partially offset by falling prices for fuel.

There was also a downward contribution from food and non-alcoholic beverages

Turning to food prices, the ONS revealed a slowing in the annual rate to 18.4% in the year to May, down from 19.1% in April and 19.2% in March.

The price of milk, cheese and eggs fell back, while the price of fish increased from 14.2% in the year to April, to 16.6% in the year to May.

Steep base rate hike on the cards

Given all the data, experts suggested it could mean the Bank of England is forced into raising the base rate by 0.5% to 5% at its meeting tomorrow (Thursday 22 June).

Tom Hopkins, portfolio manager at BRI Wealth Management, said: “Core inflation is the key concern, keeping UK inflation stubbornly high. We would have had downward contributions coming from fuels and food, unfortunately this would have been offset by rises in services inflation. At 8.7%, households will still be feeling the pain of the squeeze on budgets.

“The Bank of England meets tomorrow to decide interest rates, but given the strong rise in core inflation coupled with a surprisingly resilient economy, we believe a 50 basis point rise will be more in consideration for the Bank of England than the unanimous expectation of 25bp amongst economists.

“Inflation remains well above the 2% target rate and given Rishi Sunak’s target of halving inflation to 5% by the end of the 2023 that he pledged in January, maybe the Bank of England needs to do more.”

Danni Hewson, AJ Bell head of financial analysis, said: “Inflation had been expected to fall – at least a bit – but it hasn’t obliged, remaining stubbornly sticky and cementing the prospect of a rate rise tomorrow as well as raising expectation that the hike will be higher than had been previously anticipated.

“There is a tiny bit of good news hidden in this troubling update from the ONS and that’s the rate at which food prices are rising, which has slowed, but it will be little comfort to all those facing huge increases in their monthly mortgage payments.”

Hewson added that with a tight labour market comes the pressure on employers to keep their skilled workforce happy, “which is increasingly difficult as that workforce becomes even more inflation weary”.

She said: “They’ve battled through high energy costs, switched supermarkets and traded down for some of those nice-to-haves, but the huge numbers some homeowners are facing when they come to re-mortgaging will undoubtedly put pressure on employers to hike wages further in the coming months.

“There will be more pressure on the Government to step in and help struggling homeowners, especially as an election creeps ever closer.”