UK Inflation Heats Up: April’s 3.5% Rise Stuns Markets and Households

UK inflation jumped to 3.5% in April 2025, its highest level since January 2024, according to the Office for National Statistics (ONS). The figure not only exceeded March’s 2.6% but also outpaced economists’ forecasts of 3.3%, reigniting concerns about the pace and persistence of price rises across the country.

Key Highlights:

Energy and Utility Bills Lead the Surge: The sharp rise was primarily driven by increases in household bills, with water, electricity, and gas prices all climbing after new rates took effect on April 1. Ofgem’s quarterly price cap was raised by 6.4% to £1,849, amplifying the impact on household budgets.
Above Bank of England Target: The 3.5% inflation rate is well above the Bank of England’s 2% target. The Bank had previously warned of a temporary spike, forecasting inflation could reach 3.7% by September before easing later in the year.
Wider Economic Backdrop: The rise comes despite the Bank of England’s recent rate cuts, which brought the base rate down to 4.25%. Persistent inflation, strong wage growth, and new US tariffs have complicated the central bank’s efforts to balance economic growth with price stability.
Short-Term Outlook: Economists expect inflation to remain elevated in the coming months, as higher energy and regulated prices continue to filter through. However, the Bank of England projects a return to the 2% target by early 2026, barring further external shocks.
Market Implications: The unexpected jump may prompt the Bank to pause further rate cuts in the near term, as policymakers weigh the risks of entrenched inflation against the need to support economic recovery.

The April inflation data underscores the ongoing challenges facing UK households and policymakers, as energy costs and global uncertainties keep upward pressure on prices.

Source: Bloomberg, BBC, Morningstar