Date: 21 May 2025

The latest data from the Office for National Statistics (ONS) reveals that UK inflation surged to 3.5% in April 2025, up from 2.6% in March. This marks the highest inflation rate since January 2024, driven largely by increased household bills, travel costs, and wage pressures.

 Key Drivers Behind the Surge

• Energy Prices: Ofgem’s energy price cap increased by 6.4%, pushing electricity and gas prices up by 6.7% year-on-year.
• Water and Sewerage Charges: A record-breaking 26.1% monthly rise in water bills — the steepest increase since 1988.
• Airfares: Travel prices rose by 27.5% in April due to Easter demand, one of the largest monthly increases on record.
• Vehicle Excise Duty (VED): New tax charges, including on electric vehicles, lifted transport-related costs.
• Wages & Minimum Wage: A significant minimum wage hike impacted overall business expenses and pricing strategies.

 Core and Services Inflation

Core inflation (excluding food and energy) increased to 3.8%, while services inflation accelerated to 5.4%, exceeding the Bank of England’s forecast of 5%.

 Implications for Monetary Policy

The Bank of England, which recently cut its interest rate to 4.25%, might now slow down further rate cuts. With inflation expected to persist through 2025, policymakers must carefully balance between supporting growth and controlling inflation.

 Impact on Households

Households are already feeling the pinch from increased utility bills, higher travel costs, and rising food prices. The government has pledged support, but opposition parties criticize the management of inflation risks.

 Outlook Ahead

Economists forecast inflation to remain above the Bank of England’s 2% target for the remainder of 2025. Persistent wage growth, tax adjustments, and elevated service prices are expected to maintain upward pressure on inflation, delaying significant interest rate cuts until mid-2026.

 Source Links

• The Guardian — UK Inflation Rises
• Reuters — UK Economic Growth Outlook
• The Times — Interest Rate Implications

Written by: Praveen Kumar | viecapital.blogspot.com