Higher-than-expected increase complicates outlook for Bank of England's next rate call
The UK’s annual inflation rate rose to 3.5% in April, up from 2.6% in March, according to figures released by the Office for National Statistics (ONS).
Consumer prices increased by 1.2% on a monthly basis, compared to a 0.3% rise in April 2024.
The reading was slightly above expectations. Economists had predicted a 3.3% annual increase, while the Bank of England had projected a 3.4% rate.
The data may influence the Bank of England’s next move on interest rates, as inflation continues to run above the central bank’s 2% target. Earlier this month, the central bank reduced the base rate by 25 basis points to 4.25%. However, the monetary policy committee was divided: two members voted to hold rates steady, while another two favoured a more aggressive cut of 50 basis points.
Core inflation — which strips out volatile items such as energy, food, alcohol, and tobacco — rose by 3.8% in the 12 months to April, up from 3.4% in the 12 months to March.
“Significant increases in household bills caused inflation to climb steeply,” said Grant Fitzner, ONS acting director general. “Gas and electricity bills rose this month compared with sharp falls at the same time last year due to changes to the Ofgem energy price cap.
“Water and sewerage bills also rose strongly this year as did vehicle excise duty, which all pushed the headline rate up to its highest level since the beginning of last year. This was partially offset by falling prices for motor fuels and clothing, driven by heavy discounting for children's garments and women's footwear.”
Consumer Price Index (CPI) rose by 3.5% in the 12 months to April 2025, up from 2.6% in March 2025.
— Office for National Statistics (ONS) (@ONS) May 21, 2025
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“Today’s numbers will likely come as a disappointment to many across the country,” commented Nathan Emerson, chief executive at Propertymark. “It remains vital that the UK economy delivers growth, to help keep inflation on track with the Bank of England’s 2% target or below.
“There is positive news that the wider global economy is responding to a calming down of international trading relationships, which will prove influential to the domestic economy.”
For Ben Thompson, deputy chief executive of Mortgage Advice Bureau, while inflation rising in April was widely expected and forecasted, it should not discourage homebuyers from taking their first, or next, step on the property ladder, especially with summer proving the most popular time to move.
“Our research revealed that 72% of our customers moved to a new property in the summer of 2024, which was actually just before mortgage rates started falling from their recent highs,” he noted. “With more innovation across the market than ever before, including a host of sub-4% rates, there’s never been a better time to buy.”
Emerson agreed, saying housing would play a central role in boosting overall growth in the UK, and with the summer months being historically busy for the housing market, it is likely that momentum will continue throughout this period, despite the economic turbulence during the first quarter of 2025.
“Inflation increasing may deter the Bank of England from dropping interest rates on June 19,” he said. “However, when the time is right, we hope to see them fall and more competitive mortgage deals appear across the lending spectrum.”
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