UK Inflation Strongest Since Early 2024 On Household Bills, Employer Tax

(RTTNews) - UK consumer price inflation accelerated sharply to the highest level in more than a year in April due to higher domestic bills and the hike in employers' taxes, official data revealed on Wednesday.

The consumer price index rose by a bigger-than-expected 3.5 percent year-on-year in April, which was faster than the 2.6 percent increase in March, the Office for National Statistics reported.

Inflation was expected to rise to 3.3 percent. Moreover, this was the highest since January 2024.

On a monthly basis, the CPI advanced at a faster pace of 1.2 percent after rising 0.3 percent in March. This was also faster than the forecast of 1.1 percent.

Core inflation that excludes prices of energy, food, alcohol and tobacco, rose to 3.8 percent from 3.4 percent in March. This was also above economists' forecast of 3.6 percent.

Prices of goods grew 1.7 percent annually after rising 0.6 percent. Likewise, services inflation rose to 5.4 percent from 4.7 percent.

The largest upward contribution to annual inflation came from housing and household services, transport and recreation and culture. These were partially offset by a downward contribution from clothing and footwear.

The Bank of England has reduced the benchmark interest rate four times since last August. Earlier this month, the rate was lowered by a quarter-point to 4.25 percent.

On Tuesday, BoE Chief Economist Huw Pill said he is concerned about the pace of withdrawal of monetary policy restriction since last summer.

The quarterly interest rate cuts of 25 basis points are too rapid given the balance of risks to price stability, he added. Pill said his dissenting vote should not be seen as favoring a halt to the withdrawal of restriction.

ING economist James Smith said services inflation was driven by a big change in road tax and the timing of Easter.

The economist said services inflation will fall back to the 4.5 percent area this summer, which will keep the BoE on track for quarterly rate cuts through this year and into 2026. But an August rate cut is still highly unlikely.

Another report released by the ONS showed that average house prices increased 6.4 percent from a year ago in March, faster than the 5.5 percent rise in February.