A higher-than-expected UK CPI inflation reading of 3.5% sent the pound higher against the dollar on Wednesday as heating bills drove average prices up.
“Inflation is back with a bang: like an unwanted house guest, breaking down the door, emptying the fridge and bleeding you dry,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.
“The spike in prices is the biggest we’ve seen since the cost-of-living crisis, and even larger than had been forecast.”
Economists had predicted CPI would rise to 3.3% in April from 2.6% March. The bigger-than-expected jump will bring into question whether the Bank of England has scope to cut interest rates further after reducing rates by 25bps at their last meeting.
Core inflation rose to 3.8% from 3.4% in March.
“The jump in inflation in April was always on the cards due to the rise in energy bills, but it has exceeded forecasts – marking the highest rate in over a year. It underlines the fact that the path back to target inflation is far from straightforward,” said Myron Jobson, Senior Personal Finance Analyst, interactive investor.
“Core inflation, which strips out volatile food and fuel prices to provide a clearer picture of the underlying trend, has also edged higher, raising questions over whether this could slow the Bank of England’s interest rate cutting cycle. That remains to be seen. What’s clear is that the need to turbocharge economic growth – particularly amid growing uncertainty stemming from Trump’s tariff war – remains a key priority.”