UK inflation falls to 2.8% in April, boosted by energy price cap
Quick Look
- UK inflation dropped to 2.8% in April, down from 3.3% in March, driven by a lower household energy price cap.
- While welcome, the slowdown may be temporary as fuel costs rise due to the Middle East conflict.
AI-generated summary
Why It Matters
UK inflation has slowed to 2.8% in April, down from 3.3% in March, primarily due to a reduction in the household energy price cap. This comes after the chancellor shifted green energy costs to general taxation in the November budget. Economists had predicted a slowdown to 3% partly due to the Ofgem price cap.
UK inflation slowed to 2.8% in April, according to official figures, as a reduction in the household energy price cap helped soften the sharp rise in fuel costs since the start of the Iran war.
The Office for National Statistics (ONS) said the consumer prices index measure of inflation eased from March’s reading of 3.3%, suggesting the impact of the Iran war has not yet hit UK households as much as feared.
Economists had been expecting inflation to slow to 3%, partly because of the impact of Ofgem’s lower energy price cap, which reduced the typical annual dual-fuel bill in Great Britain to £1,641 from April compared with £1,849 a year earlier.
The slowdown in inflation will be welcome news for the chancellor, Rachel Reeves, after she shifted some green energy costs away from household bills and into general taxation in her November budget to help ensure bills fell from April.
Water bills and vehicle excise duty also increased by less in April this year compared with 2025, when they both rose sharply, while the early Easter affected prices such as air fares in comparison with last year.
However, economists believe the drop in inflation is unlikely to last as petrol and diesel prices have soared since the start of the Middle East conflict, reflecting a jump in the global oil price to more than $110 a barrel as the closure of the critical strait of Hormuz affects energy supplies.
The drop in the inflation rate comes after ONS data released on Tuesday showed wage growth slowed and unemployment rose in March. The figures are likely to reduce the likelihood of the Bank of England raising interest rates at its next meeting on 18 June.
Rate-setters at the Bank have to find a balance between containing inflation and not denting economic activity. The Bank held rates at 3.75% at its meeting last month but said it was prepared to push up the cost of borrowing if inflation continued to rise.
More details soon …
What to Watch
AI outlook — possibilities, not facts
The Bank of England is less likely to raise interest rates at its next meeting.
Likely · Within days
Inflation may increase again in the coming months.
Likely · Within months
Open Questions
- What is the exact timeline for the impact of rising fuel costs on future inflation?
- Will the Bank of England raise interest rates at its next meeting?
- What are the specific geopolitical developments causing the rise in oil prices and the closure of the Strait of Hormuz?
- How will the shift of green energy costs affect general taxation in the long term?
