Surprise Inflation Jump of Nearly 1% pa to 3.5% pa

The UK’s standard measure of inflation, the Consumer Prices Index (CPI) jumped a massive 0.9% pa to 3.5% pa in April 2025.  Whilst an increase was expected given lots of inflationary price rises in the new tax year starting 6^th April, the level of increase has taken many by surprise.

We said last month that inflation has been bouncing up and down in a confused manner, as are governments, investors, business owners and consumers.  Inflation climbed in January and then fell in February and March only to now climb again in April.

• December 2024 – CPI fell by 0.1% to 2.5% pa.
• January 2025 – CPI climbed 0.5% to 3.0% pa.
• February 2025 – CPI fell by 0.2% to 2.8% pa.
• March 2025 – CPI fell again by 0.2% to 2.6% pa.
• April 2025 - (released this morning by the Office for National Statistics ONS) – CPI climbed a massive 0.9% pa to 3.5% pa.

Government Policy is Choking Businesses

So, we are already at 1.0% pa higher inflation than we were in just 5 months ago.  No doubt the government will continue to blame the previous government, as they appear to always do now, and not accept that their own policies have driven most firms to increase prices on the back of massive employer national insurance increases and huge national minimum wage increases for all, with employees below age 21, getting minimum wage increases in a year of between 16% and 18% and over 2 years, staggering increases of nearly 43%.  Even for over 21s, minimum wages have increased by over 33% in 2 years.  No wonder companies are putting prices up and inflation is climbing again.

The main contributors to price rises were:

• Housing and household services (mainly due to the 6.4 per cent rise in Ofgem’s energy price cap in April)
• Transport
• Recreation and culture (where younger people tend to work)

Downward pressure came from:

• Clothing and footwear
• Furniture and household goods

RPI Up a Massive 1.3% pa to 4.5% pa

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) and still our preferred measure of real inflation, climbed to 4.5% from 3.2% pa  and is now back to late 2023/early 2024 figures but the picture is much worse now than it was before Reeves’ first budget in October 2024 and the Spring Statement in March 2025.

Comment

We suggested last month that the Bank of England would cut interest rates, and they did.  We have also said that the Bank of England is unlikely to cut rates again in June and this latest inflation report all but ‘kills off’ any hope of another rate cut.  We do not expect the Bank of England to cut rates again until after the summer.

Key dates for us all:

• Next ONS inflation report 18 June 2025.
• Next Bank of England MPC interest rate decision 19 June 2025.