London (AP) – UK inflation surged to its highest level in over a year in April, driven by a multitude of domestic bills including energy and water, as per official figures released on Wednesday.
The National Bureau of Statistics reported that the key inflation measure, represented by the consumer price index, rose by 3.5% in April compared to 2.6% in March.
This was the highest rate since January 2024, surpassing expectations of an increase to 3.3% against a more conservative forecast.
The extent of the increase was the largest since October 2022, coinciding with the peak of the energy crisis related to Russia’s full-scale invasion of Ukraine.
Economists anticipated a considerable rise, noting a significant annual increase in various household bills in April, combined with greater tax implications for businesses and a notable increase in minimum wage.
It is widely believed that inflation will stay above 3% for the rest of the year, reducing the likelihood of further interest rate cuts from the Bank of England, which has a target inflation rate of 2%.
On Tuesday, bank chief economist Huw Pill indicated that borrowing rates were declining too rapidly, expressing concerns over underlying inflationary pressures.
Since initiating cuts from 5.25% for the first time in 16 years in August of last year, banks have gradually lowered rates by a quarter percentage point every three months. Earlier this month, it was reduced to 4.25%.
In light of the latest inflation data, Rob Wood, chief UK economist at Pantheon Macroeconomics, stated that the reduction in the “exact quarterly schedule” was “far from certain.”
While inflation is expected to exceed bank targets this year, economists predict it will decline next year due to recent trends, particularly related to Trade Contracts, as many tariffs initiated by President Donald Trump between the US and the UK have been discarded.
Nonetheless, the sharp increase in inflation presents a challenging situation for the Labour government, which returned to power last July after a 14-year hiatus. In recent weeks, Labour has highlighted what is perceived as economic success, including anticipated first-quarter growth and a series of trade agreements, such as the customs deal with the US, the trade agreement with India, and the recalibration of UK-EU relations post-Brexit.
“I’m disappointed with these numbers as I know the cost of living pressures are affecting working individuals,” stated Treasury Chief Rachel Reeves.
The main opposition Conservative Party, which Labour displaced in power, has sought to attribute responsibility for Reeves’ decision to raise the tax burden on businesses.
“Families are bearing the costs of the Labour Prime Minister’s choices,” remarked Mel Stride, a spokesperson for the Conservative economy.
Source: apnews.com