UK inflation eased more than expected in April, slowing to 2.8% from 3.3% in March, according to preliminary data from the Office for National Statistics (ONS) on Wednesday, as falling energy costs and smaller increases in several household bills helped ease price pressures.
Economists polled by Reuters had forecast a milder decline to 3%, with the sharper-than-expected drop largely attributed to a new energy price cap introduced by regulator Ofgem on 1 April.
Grant Fitzner, chief economist at the ONS, said the fall was driven primarily by lower electricity and gas prices, supported by government measures and earlier declines in global energy costs.
“There was a notable fall in annual inflation led by lower electricity and gas prices. This was due to the Government’s energy bill support package reducing variable and fixed tariffs, along with lower global wholesale energy prices before the conflict in the Middle East, which fed through to the reduction in the Ofgem cap,” he said in a post on X on Wednesday.
He added that smaller increases in water and sewage charges, as well as road tax, compared with last year also contributed to the slowdown. Food prices also helped push inflation lower, particularly in chocolate and meat products, alongside a decline in package holiday costs.
“These were only partially offset by a further increase in petrol and diesel prices, and an uptick in the cost of clothing and footwear,” Fitzner said.
Despite the easing in April, economists expect price pressures to pick up again in the coming months as higher energy costs begin to feed through, driven in part by renewed geopolitical tensions and the impact of the Iran conflict on global energy markets.
The government has also faced mounting pressure over its approach to energy policy, including calls for stronger measures to reduce exposure to volatile import prices and greater exploitation of remaining North Sea oil and gas reserves.
In response, Chancellor Rachel Reeves is expected to unveil sweeping reforms aimed at giving Parliament greater authority to approve critical energy infrastructure projects, according to the UK Treasury.
Attention is now turning to the Bank of England (BoE), which continues to monitor both headline inflation and so-called “second-round effects”, including wage growth and business pricing behaviour. The central bank has indicated it remains prepared to adjust monetary policy if inflation proves persistent.
Markets on Wednesday were pricing in a strong likelihood of a 25-basis-point interest rate increase at the BoE’s July meeting, which would take Bank Rate to 4%.
However, policymakers remain cautious about tightening too aggressively amid signs of economic weakness. UK labour market data released on Tuesday showed unemployment rising to 5% in the three months to March, up from 4.9% previously, reinforcing concerns about a slowing economy.
Economists suggest the Monetary Policy Committee (MPC) may opt to hold rates at its next meeting on 18 June, preferring to wait for clearer signals on inflation and growth before taking further action.
“Inflation took a step back in April, but is set to leap at the end of spring,” said George Brown, senior economist at Schroders.
“Higher energy prices look likely to lift inflation above 4% this year, having previously been on course to fall to around the 2% target this summer,” he added in emailed comments.
Brown warned that the key risk now is whether price pressures begin to feed into wages and broader inflation dynamics.
“What matters now is whether this starts to bleed into broader price and wage setting. A softening labour market and fragile growth should limit that risk, but the Bank of England can ill afford to be complacent after years of successive global supply shocks.”
He added that while the BoE is likely to maintain a hawkish tone, it may ultimately avoid further rate hikes this year.
Boluwatife Enome
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