- CPI fell to 2.8% in April, down from 3.3% in March
- Main reason for the fall was the reduction of the energy price cap
- Producer input prices rose 7.7% and the import price index by 8% in the year to April
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK inflation figures:
“With all the talk of rising prices some people might be scratching their heads that the headline inflation figure for April came in at just 2.8%, significantly down on where it landed in March.
“But this bright spot is set to be relegated to the past in the months to come. Inflation on motor fuels is already at the highest levels since September 2022 and input costs going into our factories hit 7.7% in April.
“Looking at the positive side of the equation, the biggest contributor to the fall in inflation in April came from the energy price cap which was calculated in the period before the Iran war began. The cap included measures announced by the chancellor in the Budget which helped deliver an average fall of £117 a year for dual fuel customers.
“That wasn’t the only downward pressure. Water bills rose but not by as much as April 2025, package holiday costs were down because these figures didn’t capture the easter holiday period, and overall service inflation cooled thanks to a sluggish labour market with limited wage bargaining powers.
“Last year businesses were also dealing with the double whammy of employer National Insurance rises and a chunky increase in the National Living Wage, which was much lower in 2026.
“That’s something that will be carefully monitored by Bank of England rate setters trying to keep their balance on the economic tightrope. They face a challenge that requires them to try and limit the secondary impact of rising prices whilst keeping one eye on sluggish economic growth and a lacklustre labour market.
“The IMF has stated that the UK’s central bank would be advisable to hold rates steady over the course of the year, and whilst markets aren’t convinced that will be the outcome, today the expectation is that rate hikes will be slower and fewer this year than had previously been priced in.
“On the negative side of today’s workbook, the price of energy is set to rise in July and again in October, increasing pressure on struggling families.
“With input costs going into factories already up along with import prices, the 2.4% rise in core CPI goods inflation is just the tip of the iceberg. Although the Bank of England’s worst-case scenario looks unlikely at the moment as Brent crude hovers around the $110 a barrel mark, inflation is still expected to surpass 4% by the end of the year.
“April’s 2.8% figure is positive, but inflation had been expected to fall to the Bank of England’s 2% target by this point in the year, a trend derailed by increased instability in the Middle East.
“The full impact of ‘Trumpflation’ as a result of the conflict will take months to be felt by consumers. However, resurgent nervousness about how budgets are likely to be impacted is making consumers reconsider their spending plans for the year. With any government intervention expected to be limited and targeted there is a danger of recession, even if it only ends up being a technical and short lived one.”
