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UK inflation dips to 2.8% in April
The UK's annual inflation rate dropped to 2.8% in April, down from 3.3% in March, driven by lower gas and electricity costs, the Office for National Statistics (ONS) reported. However, economists warn this decline may be temporary as the Iran war continues to push global energy prices higher.
Energy bill support cushions fall
The government's energy bill support package and a drop in wholesale prices before the Middle East conflict helped reduce household energy costs, the ONS said. Despite this, analysts predict inflation will climb to around 4% by the end of 2026 as the war's impact on fuel prices persists.
Fuel prices surge to near-2022 highs
Petrol prices rose to 156.8p per litre in April, while diesel hit 190p-up over 30p from the previous month, according to ONS data. The RAC noted petrol prices reached a new peak of 158.52p per litre this week, further squeezing household budgets.
Economists warn of inflation rebound
Yael Selfin, chief economist at KPMG, called the 2.8% rate a likely low point, forecasting inflation to rise toward 4% by year-end.
"We anticipate inflation will trend higher through much of 2026,"
Yael Selfin, KPMG
Lindsay James, investment strategist at Quilter, noted the 7% cut to the energy price cap in April offered temporary relief but cautioned that higher fuel costs signal "potential threats that still lurk for consumers and businesses."
Government and opposition clash over economic strategy
Chancellor Rachel Reeves announced plans to unveil further cost-of-living support, citing last year's budget measures for "keeping inflation down amid global instability." She highlighted £117 in energy bill relief, frozen rail fares, and the removal of the two-child benefit cap as key steps.
Shadow Chancellor Mel Stride countered that prices "are still rising too fast," blaming Labour for leaving the economy "weak and exposed" to the Iran war's fallout.
Food and factory costs add pressure
Food and alcohol inflation slowed to 3% in April, down from 3.7% in March, aided by lower prices for chocolate and meat. However, the Food and Drink Federation warned food inflation could hit 10% by year-end due to rising transport and energy costs.
Ian Cheetham, managing director of Set Produce, a fresh food supplier, said:
"With fuel and energy prices rising, it's inevitable food prices will go up. We can absorb some costs, but transportation is a major challenge."
Producer input prices-materials and fuel costs for manufacturers-rose 7.7% annually in April, driven by higher oil prices, according to ONS chief economist Grant Fitzner. He also noted lower water bills and vehicle taxes helped ease overall inflation.
Bank of England faces limited options
The Bank of England targets 2% inflation and adjusts interest rates to influence spending. However, KPMG's Selfin said the Bank is unlikely to raise rates next month, as much of the current inflation stems from external factors like the Iran war, which higher rates may not address.
