UK inflation fell to 2.8% in April, its lowest level in more than a year, as a reduction in the household energy price cap helped offset rising fuel costs linked to the Iran war. The Office for National Statistics (ONS) reported the consumer prices index eased from 3.3% in March, beating economists' forecasts of 3%.
The decline was partly driven by Ofgem's lower energy price cap, which reduced the typical annual dual-fuel bill in Great Britain to £1,641 from April, a fall of £117. Electricity prices dropped 8.4% last month, the ONS said. Services inflation, a key measure of underlying price pressures, fell to 3.2%, the lowest since January 2022.
Chancellor Rachel Reeves welcomed the data, attributing the slowdown to her decision to shift some green energy costs from household bills to general taxation in the November budget. She said: 'The war in Iran is not our war but one we will need to respond to, and the decisions I took in the budget last year have kept inflation down as we deal with global instability.'
However, economists warn the drop may be temporary. Petrol and diesel prices have soared since the start of the Middle East conflict, with global oil prices exceeding $110 a barrel due to the closure of the Strait of Hormuz. The energy price cap is forecast to jump 13% to £1,850 in July. Suren Thiru, chief economist at ICAEW, described the slowdown as 'a last interlude before the Iran war-induced inflation storm hits', predicting inflation could reach 4% this summer.
Producer price inflation, measuring costs for UK manufacturers, rose sharply to 7.7% in April from 5.3% in March, driven by a 75.4% increase in crude oil costs. Core inflation, excluding energy and food, fell to 2.5% from 3.1%. The data reduces the likelihood of a Bank of England rate hike at its next meeting on 18 June, as wage growth slowed and unemployment rose in March.
