This morning’s inflation data from the Office for National Statistics brought few surprises but plenty of useful signals for investors.

Headline CPI came in at 3.4% in May, down slightly from 3.5% in April and precisely in line with Bank of England expectations. Core inflation also eased – from 3.8% to 3.5% – offering further reassurance that the UK’s disinflationary trend remains on track.

While markets are unlikely to react significantly to today’s figures, the data reinforces a growing consensus: the Bank of England is expected to hold the base rate at 4.25% tomorrow, but the path toward a first rate cut, likely in August, now looks more certain.

Volatility Cools, But Not Across the Board

Some of the more seasonal components of inflation saw sharp corrections in May. Airfares, for example, swung from over 16% annual growth in April to –4%, reflecting the natural cooling seen post-Easter. Transport costs overall acted as a drag on inflation, offsetting stubborn pressures in areas like food and housing.

Indeed, one of the standout details in today’s release is a fresh uptick in food price inflation, now at its highest level in 15 months. For many households, and by extension, tenants, this remains a core affordability concern, particularly in lower-income brackets.

What This Means for Property Investors and Borrowers

For property investors, this latest data provides another layer of stability. It doesn’t radically shift the landscape, but it confirms several key trends already taking shape, most of which are constructive for long-term planning and financing strategy.

Base Rate Cuts Are Coming, Just Not Yet

Today’s data won’t prompt an immediate move from the Bank of England. A cut tomorrow would surprise markets and risk undermining the Bank’s inflation-fighting credibility. But the sustained fall in core inflation, combined with softening in other macro indicators like employment, sets the stage for a cut at the August Monetary Policy Committee meeting. A move to 4.0% is now priced in by most forecasters.

For borrowers, this means continued stability in the short term and greater affordability headroom later in the year, particularly for those refinancing or structuring development finance.

Affordability Remains a Mixed Picture

While borrowing costs are expected to fall, the cost of living remains a pressure point. Food inflation may not shift base rate policy, but it does impact disposable incomes – especially in regions where tenants already face high housing costs. For investors with large rental portfolios, this will require close attention to tenant resilience and local wage dynamics.

On the other hand, falling transport costs and stabilising core inflation offer a modest reprieve for households. This supports demand fundamentals in the private rental sector, particularly in commuter markets and regional hubs.

Strategic Planning Can Resume with Greater Confidence

Perhaps most importantly, this data adds to a broader picture of macroeconomic predictability returning after several turbulent years. Investors can now model acquisition or refinancing strategies with more confidence, knowing that:

• Inflation is no longer spiraling

• Rate policy is becoming more predictable

• Real wage growth remains intact in many segments of the economy

In Summary

While today’s inflation figures won’t move markets, they do move the dial on investor confidence.

A late-summer rate cut is now the most likely scenario, offering potential upside for borrowers and developers alike. But affordability pressures, particularly in food and housing, remain part of the equation, and investor strategies should account for regional and sectoral variation.

In this environment, disciplined planning and informed financing decisions will separate opportunity from risk.