UK inflation rises to its highest level since January 2024 after domestic bills spike
LONDON: Inflation in the UK spiked to its highest level for more than a year in April amid a raft of higher domestic bills, such as energy and water, official figures showed on Wednesday.
The Office for National Statistics said that its key measure of inflation, as measured by the consumer prices index, rose by 3.5% in the year to April, up from 2.6% in March.
April’s rate was the highest since January 2024 and exceeded expectations for a more modest increase to 3.3%.
The scale of the rise was also the largest since October 2022, at the height of the energy crisis following Russia’s full-scale invasion of Ukraine.
Economists had anticipated a sizeable increase, as April saw hefty annual price rises for a range of household bills, as well as the impact of higher taxes on businesses and a significant increase in the minimum wage.
Inflation is widely expected to remain above 3% for the rest of the year, which could dampen expectations of further interest rate reductions from the Bank of England, whose inflation target is 2%.
On Tuesday, the bank’s chief economist, Huw Pill, said that borrowing rates had been cut too quickly, in a sign that he is concerned about underlying inflationary pressures.
Since it began reducing borrowing costs last August from the 16-year high of 5.25%, the bank has proceeded gradually, lowering its main interest rate by a quarter of a percentage point every three months. Earlier this month, it reduced it to 4.25%.
Following the latest inflation update, Rob Wood, chief UK economist at Pantheon Macroeconomics, said that cuts on a “precise quarterly schedule” are “far from certain.”
Even though inflation is expected to remain above the bank’s target this year, economists anticipate a decline next year, partly due to the recent trade deal between the US and the UK, which will mean many of the tariffs that former US President Donald Trump had proposed have been scrapped.
Nevertheless, the sharp increase in inflation comes at a challenging time for the Labour Party government, which returned to power last July for the first time in 14 years. In recent weeks, Labour has highlighted what it considers to be economic successes, including stronger-than-expected first-quarter growth and a trio of trade deals. Alongside the tariff pact with the US, the government has concluded a trade agreement with India and reset the United Kingdom’s relationship with the European Union after Brexit.
“I am disappointed with these figures, because I know cost-of-living pressures are still weighing down on working people,” Treasury chief Rachel Reeves said.
The main opposition Conservative Party, which Labour replaced in government, sought to pin the blame on Reeves’ decision to increase the tax burden on businesses.
“Families are paying the price for the Labour Chancellor’s choices,” said Mel Stride, the Tories’ economy spokesman.
By RSS/AP
