Driven by higher food and energy prices, UK consumer price inflation jumped in April, marking its highest level in 13 months and dampened expectations of an interest rate cut.
Tuesday, a report from the Office for National Statistics showed that the consume price index annual inflation accelerated to 3% in April from 2.5% in March. Economists had expected the annual rate to edge up to 2.6% in April.
Annual inflation continues to stay well above the central bank's target of 2%. April inflation is the highest rate since March 2007, when inflation reached the threshold of 3.1%, triggering an open letter from the central bank governor to the Chancellor explaining the cause and actions taken to control it. Further, the governor has to state a time frame in the letter within which inflation can be brought back to target. The latest data raised the possibility of another letter from Governor Mervyn King to the Chancellor.
Month-on-month, consumer prices rose 0.8% in April, the fastest pace since May 2001 and higher than the 0.5% expected by analysts.
The core annual inflation for April came in at 1.4%, slightly above 1.3% forecast.
Retail prices rose 4.2% year-on-year in April, faster than March's 3.8% and 3.9% expected by economists. On a monthly basis, retail price inflation was 0.9%, higher than the 0.6% forecast. The annual growth in the retail price index, excluding mortgage interest payments stood at 4%, up from 3.5% in the prior month. The RPIX also climbed more than the 3.6% expected by analysts.
The development on the inflation front is in sync with Governor King's expectations. Earlier, King had revealed his expectations of an inflation surge in the near term. He also said he may be forced to pen another letter to the Chancellor. But, analysts see a likelihood of inflation holding above 3% for a longer term given the tariff hikes announced by leading utility providers.
Last week, the Bank of England left the key interest rate unchanged at 5% as policy makers weighed inflation more than slowing growth. In April, the central bank had lowered the interest rate by 25 basis points to 5%. It was the third interest rate cut since December 2007. The minutes of the session showed that the nine-member Monetary Policy Committee split three ways for the first time in nearly two years to decide on the rate cut.
The MPC's latest Inflation Report, which will reveal its inflation and output projections, is set to be released on May 14.
The news of soaring consumer price inflation came on the heels of the release of the producer price inflation numbers, which showed a surge in April and stood far above expectations. Producer prices increased at the fastest pace since 1986.
With separate measures of inflation staying higher, expectations of a rate cut were doused.
Among the different components of CPI, food and alcoholic beverages and utility costs contributed the most to inflation in April. In the alcohol and tobacco group, prices of spirits and wines rose largely due to the increase in excise duty that was higher than last year.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.