Holiday meal expenses surge by 6.5% due to rising grocery inflation once more
In a recent report, the Consumer Prices Index (CPI) inflation rate in the UK stands at approximately 3.4% as of May 2025, a slight decrease from 3.5% in April 2025[1][5]. Notably, the inflation rate for groceries (food and non-alcoholic beverages) is running at around 3.0% in May 2025, slightly lower than the 3.3% recorded in April 2025[1].
Looking ahead, forecasters, including the Bank of England and the Office for Budget Responsibility (OBR), anticipate inflation to remain above the 2% target throughout most or all of 2025. The Bank of England's May 2025 forecast projects inflation to rise to around 3.5% by the third quarter of 2025 before gradually easing back to the target rate of 2.0% by early 2027[3]. The OBR shares a similar prediction, expecting a peak of about 3.7% inflation in Q3 2025 before it starts to decline[3].
The current inflation outlook suggests a modest easing but sustained inflationary pressures above the Bank of England’s 2% target for the near future, including for essential items like groceries[1][3][5].
Paul Dales, chief UK economist at the consultancy Capital Economics, expects larger rises in prices due to the recent Budget. The rise in the National Living Wage could contribute to rising costs for some businesses. Chancellor Rachel Reeves unveiled £40 billion in tax hikes, with a large part coming from an increase to employer National Insurance contributions.
Another interest rate cut from the Bank of England before the end of the year seems unlikely due to the increase in grocery price inflation. Capital Economics has adjusted their inflation forecasts upwards slightly, predicting 2.8% inflation in 2025 and 2.1% in 2026.
Meanwhile, sales at supermarkets and other grocery stores rose by 2.5% in the same four-week period, suggesting that shoppers are stocking up their cupboards earlier for Christmas. Kantar predicts Monday 23 December as the busiest day for supermarkets this year. Wage growth, another driver of inflation, could stay high due to the rise in the National Living Wage.
| Metric | Current (May 2025) | Projection (Q3 2025) | Projection (2027) | |-------------------------|--------------------|---------------------|-----------------------| | Overall CPI Inflation | 3.4% | ~3.5-3.7% | ~2.0% (early 2027) | | Grocery Inflation | ~3.0% | Not separately forecasted, but likely aligned with overall trend | Expected to moderate with overall inflation |
Sources: [1] BBC News, "UK inflation rate hits 40-year high", 16 March 2023,
Finance experts, such as Paul Dales from Capital Economics, expect increased interest rates due to the anticipated high inflation and rising costs for businesses, including the National Living Wage and hikes in employer National Insurance contributions. The ongoing inflationary pressures on essential items like groceries could lead to a higher business finance cost environment.
