CBI responds to latest inflation data for May 2026

Alpesh Paleja, Deputy Chief Economist said:

“Inflation was widely expected to pick up in May, so the latest data comes as a welcome surprise. But this is likely to be the calm before the storm, with price pressures set to see a pronounced rise over the coming months. The direct contribution from higher energy costs is set to increase – particularly with households' energy bills rising from June – and this is likely to feed through to other parts of the inflation basket.

“That remains true despite the deal between the US and Iran to extend the ceasefire and reopen the Strait of Hormuz. Details of the agreement have yet to be finalised, and energy flows are unlikely to resume immediately, meaning it does little to alter the near-term outlook. Global energy prices also remain above their pre-conflict levels, and the lagged pass-through via supply chains means inflation is still likely to rise further over the coming months.

“However, the deal does reduce the risk of the more severe inflation scenarios that had been feared if the conflict escalated further or energy infrastructure suffered additional damage. While households are still likely to face a prolonged squeeze on living standards, the outlook is now less challenging than it appeared only a few weeks ago.”