UK inflation was 3.4% in May, ONS says

LONDON, June 18 (Reuters) - British inflation came in at an annual rate of 3.4% in May, down from an originally published 3.5% in April, the Office for National Statistics said on Wednesday.

A Reuters poll of economists had pointed to a reading of 3.4% in May, which the Bank of England had also projected in forecasts published last month.

Earlier this month the ONS said April's consumer price inflation reading of 3.5% had been overstated by 0.1 percentage points due to an error in car tax data from the government.

April's figures were not amended but the correct data was used for May's readings.

Economists surveyed by Reuters and investors think the BoE will leave interest rates on hold when it announces its June policy decision on Thursday.

Gas, electricity and water prices rose in April alongside higher taxes on employers, causing the inflation rate to leap from 2.6% in March. A rise in oil prices since the start of the Iran-Israel conflict last week could cause inflation to rise again.

Some BoE officials have said they disagree with the central bank's key assumption at its May meeting that the climb in inflation will not have longer-running effects on pricing behaviour.

Chief Economist Huw Pill said last month the pace of interest rate cuts was too fast given still strong wage pressures on inflation, but his vote in May to keep borrowing costs on hold was likely to be "a skip" not a halt to rate cuts.

Market pricing on Tuesday pointed to an 87% chance that the BoE will leave rates on hold this week, with two 0.25 percentage-point cuts priced in by the year's end.

The BoE lowered rates by a quarter point to 4.25% on May 8 in a three-way split vote, with two Monetary Policy Committee members favouring a bigger cut and two - including Pill - favouring a hold.

The central bank said in May it expects inflation to peak at about 3.7% later this year. Some economists think April might prove to be the high point although the conflict in the Middle East poses a risk of stronger price pressures. (Reporting by Andy Bruce; editing by Sarah Young)