War’s impact on UK cost of living more muted than first forecast suggesting fuel price rises have failed to spill out more widely across UK plc

• UK inflation stays at 2.8% as slowing food prices offset transport costs

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As soon as Iran choked off oil supplies through the strait of Hormuz at the start of March, there were dire warnings about rocketing UK inflation and the drastic action the Bank of England might take to rein it in.

At one point, investors were expecting as many as three quarter-point rises in interest rates before the end of the year – a sharp turnaround from earlier forecasts of rate cuts.

Surprise ONS figure confounds forecasts of an increase to 3% as Bank of England prepares to set interest rates

UK inflation unexpectedly remained at 2.8% last month as higher transport and fuel costs were offset by slower food price rises.

May’s annual price rise reading recorded by the Office for National Statistics (ONS) came despite economists’ forecasts of a rise to 3% as the Middle East restricted global energy flows.

Federal Reserve to make first decision under Kevin Warsh as Middle East hopes ease inflation pressures

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Central banks in the US and UK are expected to leave interest rates on hold this week as the peace deal in the Middle East is expected to ease inflationary pressures.

The US Federal Reserve is expected to hold its benchmark interest rate at a range of 3.5% to 3.75% on Thursday, in what will be the first policy decision under new Fed chair – and Donald Trump’s pick – Kevin Warsh.