Overview
Deutsche Bank Research projects that UK headline consumer price inflation will rise to 3.01% year-on-year in May 2026, up from April's reading, according to a note dated Thursday. The broker expects a notable recovery in services inflation, forecasting it at 3.65% year-on-year for May.
Economist commentary and near-term outlook
Chief UK Economist Sanjay Raja said the broker anticipates "more price pressures to build in the coming months - particularly as dual fuel bills reset in July," and that CPI will "track around 3.1% y-o-y this year, before slowing to 2.6% y-o-y next year."
Comparison with Bank of England projections
Deutsche Bank's forecasts place its May readings slightly below the Bank of England's April Monetary Policy Report projections. The broker expects core CPI at 2.72% year-on-year and RPI at 3.33% year-on-year for May, compared with the Bank of England's headline CPI forecast of 3.26% and core CPI of 2.83%.
Services and monthly dynamics
Services inflation, which had eased to 3.17% year-on-year in April, is forecast to bounce back to 3.65% year-on-year in May. That predicted level remains 0.21 percentage points below the Bank of England's 3.86% projection. On a monthly basis, Deutsche Bank projects services to contribute 0.39% month-on-month to CPI and 0.67% month-on-month to RPI.
Travel and hospitality components are expected to show pronounced month-on-month moves: airfares are seen rising by more than 10% month-on-month in May, while the broker's dbDIG Hotel Price Tracker indicates a nearly 14% month-on-month increase in hotel prices. Within the wider CPI basket, accommodation is pencilled in at a 2% month-on-month rise and catering prices at 0.4% month-on-month.
Goods, food and core measures
Core goods CPI is forecast to increase 0.54% month-on-month, which would put the annual core goods rate at 1.04% year-on-year - 0.08 percentage points above the Bank of England's 0.96% forecast. Deutsche Bank expects furniture prices to climb 1.3% month-on-month, used car prices to rise 0.8% month-on-month, and clothing to increase 0.8% month-on-month.
Food, alcohol and tobacco CPI is projected to rise 0.43% month-on-month, leaving the annual rate at 2.86% year-on-year. That would be 0.65 percentage points lower than the Bank of England's forecast of 3.53%.
Separately, Worldpanel's Grocery Price Inflation tracker is reported to have slowed to 3.1% year-on-year, which Deutsche Bank describes as "the slowest rate since Dec-2004."
Energy and fuel components
Energy prices are expected to fall 0.73% month-on-month for CPI, though base effects are expected to lift the annual energy rate to 7.16% year-on-year. Pump prices are forecast to decline 0.3% month-on-month. Heating oil prices are seen falling nearly 20% between the April and May index collection days.
Forecast revisions and risk considerations
For the full year, Deutsche Bank has revised its 2026 CPI forecast down slightly to 3.1% from 3.2% previously, and it lowered its 2027 CPI projection by 0.1 percentage point to 2.6%. The broker's RPI forecasts are 3.8% for 2026 and 4% for 2027.
Deutsche Bank cautions that "risks remain skewed firmly to the upside" and highlights the Iran conflict as a key watch point, alongside detailed micro price-change data, as sources of potential upside pressure on inflation.
Summary
Deutsche Bank expects UK headline CPI to climb to 3.01% year-on-year in May 2026 and for services inflation to rebound to 3.65% year-on-year. The broker warns of rising price pressures ahead of energy bill resets in July and has modestly adjusted its 2026 and 2027 inflation forecasts while underlining upside risks tied to geopolitical developments and granular price movements.