What's happened
UK inflation rose to 3.5% in April, up from 2.6% in March, marking the highest rate since January 2024. This increase is attributed to rising energy prices, council tax, and national insurance contributions, impacting household budgets significantly. Economists are divided on future inflation trends and the Bank of England's interest rate strategy.
What's behind the headline?
Key Factors Behind the Inflation Surge
- Energy Costs: The 6.4% increase in energy prices has significantly impacted household expenses.
- Council Tax and Water Bills: Local authorities raised council tax by an average of 5%, while water bills surged by 20%.
- National Insurance Contributions: The government's hike in NICs has led many firms to pass on costs to consumers.
Economic Implications
- Bank of England's Response: The unexpected inflation rise may lead the Bank to pause further interest rate cuts, despite previous reductions from 4.5% to 4.25%.
- Future Predictions: While some economists predict inflation will stabilize around 3.5%, others foresee a potential decline due to easing wage growth and energy prices.
Consumer Impact
- Household Budgets: The increase in inflation will strain household finances, particularly for low-income families already facing rising living costs.
- Retail Sector: Retailers are likely to continue raising prices, impacting consumer spending and economic growth.
What the papers say
According to Holly Williams in The Independent, inflation's rise to 3.5% was driven by significant increases in household bills, including a 6.4% rise in energy prices and steep hikes in council tax. Williams notes that the increase was larger than economists had anticipated, with many expecting a rise to only 3.3%.
Phillip Inman from The Guardian highlights that the inflation increase was influenced by the government's recent hikes in national insurance contributions and minimum wage, which pressured companies to raise prices. He points out that the Bank of England may need to reconsider its approach to interest rate cuts in light of these developments.
In contrast, some economists, like Philip Shaw from Investec, remain optimistic, suggesting that inflation may peak at 3.5% and begin to decline as wage growth and energy prices stabilize. This perspective contrasts with the more cautious outlook from Pantheon Macroeconomics, which predicts inflation will remain around 3.5% for the rest of the year.
How we got here
The rise in inflation follows a series of cost increases, including a 6.4% hike in Ofgem's energy price cap and significant rises in council tax and water bills. The government's recent increases in national insurance contributions and minimum wage have also pressured companies to raise prices.
Go deeper
- What are the main causes of the inflation rise?
- How will this affect my household budget?
- What actions might the Bank of England take next?
Common question
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What is Driving the Recent Surge in UK Inflation?
UK inflation has surged to 3.5% in April 2025, raising concerns about the cost of living and economic stability. This increase is attributed to various factors, including rising energy prices and changes in national insurance contributions. Understanding these dynamics can help individuals and businesses navigate the current economic landscape.
More on these topics
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The Office for National Statistics is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to the UK Parliament.
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The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based.
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The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom or Britain, is a sovereign country located off the northÂwestern coast of the European mainland.