UK annual inflation dropped to 2.2% in May from 2.3% in April, according to the Office for National Statistics.

The small decline means that inflation is still above the Bank's target of 2%, but the annual inflation reading for May is the lowest since January 2008.

Another inflation measure, the Retail Prices Index (RPI), which includes mortgage interest payments and housing costs, declined from -1.2% to -1.1%. The RPI measure is used by many businesses as the starting point for staff wages.

"Whatever the longer-term inflation risks may be, they are unlikely to materialise in the near future and can only be dealt with after the recession ends. The main priority must remain on easing the severe downturn in economic activity and to contain the relentless increases in unemployment," said David Kern, chief economist at the British Chambers of Commerce (BCC).