A customer looks at goods on a shelf in a supermarket on January 15, 2025 in London, England.
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The U.K.’s annual inflation rate hit 3.5% in April, coming in above analyst expectations, according to data released by the Office for National Statistics (ONS) on Wednesday.
Economists polled by Reuters had anticipated the consumer price index would reach 3.3% in the twelve months to April.
The latest data release comes against a recent trend of cooling inflation, with the rate of price rises slowing to 2.8% in February and 2.6% in March.
Core inflation, which excludes more volatile energy, food, alcohol and tobacco prices, rose by 3.8% in the year to April, up from 3.4% in the twelve months to March.
The largest upward contributions to the monthly change in the inflation rate came from housing and household services, transport, and recreation and culture. On the other end of the spectrum, the largest — partially offsetting — downward contribution was from clothing and footwear, the ONS said in a press release.
The data highlighted increasing pressures on British households, as prices of electricity, gas and other fuels rose by 6.7% in the year to April. The prices of water and sewerage rose by 26.1% in the month to April, marking the largest monthly hike since at least February 1988, the ONS said.
British Chancellor Rachel Reeves said Wednesday that she was “disappointed” with the latest data and that “cost of living pressures are still weighing down on working people.”
Economists had expected the rise, attributing it largely to the increase in the energy price cap — the maximum price that energy suppliers can charge customers — as well as a number of one-off adjustments including domestic business tax rises introduced in April, the Easter holidays and recent good weather.
Still, the data will disappoint the Labour government, which has aimed to lower cost of living pressures on British consumers. It will also be food for thought for policymakers at the Bank of England, which cut its key interest rate to 4.25% at its last meeting in early May.
The latest inflation data could “cause a bit of a stink” at the central bank, Nicholas Hyett, investment manager at broker Wealth Club, said Wednesday.
“Two members of the MPC [monetary policy committee] wanted to leave rates unchanged, and may well feel vindicated by today’s number. Higher core inflation will be particularly concerning since this measure of domestically generated inflation should be easier for the Bank to influence,” he said.
Bank of England expectations
The BOE had widely signaled that it expected a temporary rise in inflation to 3.7% in the third quarter, partly due to hikes in energy prices and in some regulated prices, such as water bills.
The predicted rise in inflation was not enough to deter the BOE from cutting its key interest rate amid ongoing uncertainty around economic growth and trade tariffs. Still, mindful of inflationary pressures, the BOE insisted at the time insisted that any further interest rate cuts would be “gradual and careful” as it looks to bring the rate of inflation down to its target of 2%.
The pace of rate cuts could be subject to change, however, if U.S. trade tariffs dampen global demand and hit U.K. growth more than expected, it said.
There was a rare bit of good news on the growth front last week, with preliminary quarterly gross domestic product (GDP) data showing a 0.7% expansion in Britain’s economic output duringthe first quarter.
Economists said the impressive data was unlikely to be replicated in the second quarter, noting that the bumper first-quarter print was largely the result of activity being brought forward ahead of prospective U.S. tariffs and of the rise in domestic businesses taxes in April.
The latest inflation data “will make for a relatively noisy report at a time when the Bank of England is eagerly trying to figure what to do next,” Julien Lafargue, chief market strategist at Barclays Private Bank, said in emailed comments Tuesday.
“However, beyond the short-term distortions, we believe the overall direction of travel for U.K. inflation is lower. This should provide the central bank with room to consider at least a couple more interest rate cuts this year, supporting favourable economic conditions going forward,” he added.
