Analysts said the data, along with recent figures showing a surge in UK unemployment and a massive contraction in the country’s economic output, meant the Bank of England was certain to pump billions more pounds into the economy under so-called quantitative easing (QE).
The Consumer Prices Index annual inflation rate slumped to 0.5 percent last month from 0.8 percent in April, the Office for National Statistics said in a statement Wednesday.
The CPI rate stood at 1.5 percent in March and at 2.0 percent in May 2019 and the last time it had stood at 0.5 percent was in June 2016.
Inflation continued to slide last month despite a rebound in oil prices.
“Global prices for crude oil fell sharply from the beginning of 2020 before recovering throughout May, albeit to levels well below the start of the year,” the ONS noted.
“Within the UK, those rises were not seen at the (petrol) pumps as the coronavirus lockdown continued.”
Another factor behind the slowdown in inflation was a cut in retail prices for recreational items.
“The cost of games and toys fell back from last month’s rises while there was a continued drop in prices at the pump in May, following the huge crude price falls seen in recent months,” said ONS statistician Jonathan Athow.
Britain’s lockdown is easing, with non-essential shops including clothes
stores reopening this week after most were ordered to shut from the final week of March.
The country’s economy has crashed spectacularly as a result of COVID-19, shrinking by one-fifth in size during April.
Official data Tuesday meanwhile showed that UK jobless claims more than doubled to 2.8 million people at the height of the country’s outbreak, or three months to the end of May.
The Bank of England has warned that the economic paralysis could lead to Britain’s worst recession in centuries.
The BoE has reacted by slashing its main interest rate to a record-low 0.1 percent and pumping £200 billion ($247 billion, 220 billion euros) into the economy to get retail banks lending to fragile businesses.
“The Bank of England will tomorrow almost certainly announce more QE, likely increasing… by at least £100 billion,” said Neil Wilson, chief market.
analyst at Markets.com.
“Numbers yesterday pointed to a looming unemployment crisis in the UK.”
The Bank of England will on Thursday unveil its latest monetary policy decisions following a regular meeting held this week.