Inflation figures for May were released last week, showing prices rose faster than expected. The higher cost of package holidays, in particular, pushed the rate of inflation up to 2.9%, up from 2.7% in April. This is now the highest rate of inflation since June 2013. However, falling fuel costs have been helping keep headline inflation under control for the time being. Given the speed of the increase, economists are now anticipating that the UK is nearing the peak of price growth for the time being. The impact of the fall in the pound has nearly been fully realised in current prices, and factory input and output costs are now falling rapidly. Wages increased at a rate of 2.1% over the three months to March, meaning that real wage growth remains negative.

The Bank of England monetary policy committee met last week. While there was once again no change in the headline interest rate, the committee surprised markets by indicating that interest rates may rise faster than anticipated by the market. Three out of eight of the committee members voted for an interest rate rise, citing higher inflation as the primary reason. However, one of the members voting for an increase is due to come to the end of their term, limiting the potential for an increase at future meetings.

Following the French parliamentary elections, Emmanuel Macron’s en Marche party has won a clear majority, gaining more than 300 seats in the 577 National Assembly. Holding the presidency and parliament will give Macron a strong hand in pushing through his reforming and pro-EU policies. However, the turnout for the election is estimated to be a record low of 42%, down significantly on five years ago. There were concerns that his presidency would come too little if it were not backed up by parliamentary support, this is now no longer the case.

The Japanese trade balance for April for May and UK industrial trends will be released this week.