The Bank of England is concerned as inflation tightens its grip on UK service businesses.

According to a study, companies in Britain's services sector boosted prices at a quick rate in May as they saw another month of robust demand, adding to the Bank of England's concerns over the sustainability of high inflation.

The preliminary reading of the S&P Global/CIPS UK PMI revealed that measures of inflation for service businesses' costs and prices crept higher, albeit they are still lower than levels reached immediately after Russia invaded Ukraine last year.

The Bank of England is keeping an eye on service sector pricing to see how much inflation pressure remains in the economy. It has raised interest rates at 12 consecutive sessions since late 2021, and its next decision is scheduled for June 22.

The PMI survey released on Tuesday offered a contrasting image for British businesses, with services firms reporting growth in May - although somewhat slower than April's one-year high - whereas manufacturing firms' activity declined again.

S&P Global's Composite PMI, which includes both the services and manufacturing sectors, fell to 53.9 from a one-year high of 54.9 in April. However, it stayed in positive territory over 50.0 for the fourth month in a row.

According to Chris Williamson, chief business economist at S&P Global, the PMI correlated with quarterly GDP growth of 0.4% in the second quarter, up from 0.1% in the first 3 months of the year.

Thus far in 2023, the British economy has outperformed many expectations of a recession published late last year.

There are also indicators that the country's key gauge of inflation, which is greater than in many other nations, could decline in the coming months, which will be welcome news for Prime Minister Rishi Sunak, who has vowed to cut it in half this year.

Based on the consensus of experts surveyed by Reuters before of Wednesday's official data release, the consumer price index fell to 8.2% in April from 10.1% in March.

However, underlying core inflation, which includes volatile energy and food prices, is forecast to decline more slowly, boosting the possibility that the Bank of England may have to maintain borrowing costs high for longer than previously anticipated.

(investing.com, reuters.com)