UK inflation falls to 2.8% in April despite rising fuel prices

The rate of inflation fell to 2.8% in the year to April, down from 3.3% in the year to March.

Energy prices were lower due to the government's energy bill support package and lower wholesale energy prices before the Iran war, the Office for National Statistics said.

However, inflation is widely expected to rise through the rest of the year as the US-Israel war with Iran continues to affect global prices.

A lower rate of inflation does not mean prices are falling across the board, but that prices are rising more slowly than previously.

The drop in inflation occurred despite the rise in fuel prices due to the Iran war. The average price of petrol was 156.8p per litre last month, according to the Office for National Statistics, the highest since November 2022. Diesel prices rose by more than 30p in April to take the average price to 190p per litre, the highest average since July 2022.

Yael Selfin, chief economist at KPMG, said the 2.8% rate of inflation was "likely as low as it gets for some time".

"We anticipate that inflation will trend higher through much of 2026, heading towards 4% by the end of the year," Selfin said.

Chancellor Rachel Reeves is set to reveal further cost of living support for households in anticipation of higher energy prices due to the conflict in the Middle East.

On Wednesday, Reeves said decisions taken in the Budget last year had "kept inflation down as we deal with global instability".

"We have already taken £117 off energy bills, frozen rail fares, and lifted the two-child limit, and over today and tomorrow I'll set out the next phase of how we will support UK households," she added.

Lindsay James, investment strategist at Quilter, said the 7% fall in the energy price cap in April was a positive for consumers, but warned it would be "short lived".

James noted the large increase in fuel prices underscored "potential threats that still lurk for consumers and businesses", and the UK should brace for higher inflation.

In a sign of what price rises could come, Office for National Statistics chief economist Grant Fitzner said the annual cost of "both raw materials and goods leaving factories continued to rise" last month due to higher oil and petrol prices.

Producer input prices rose by 7.7% in the year to April.

Over the 12 months to April, inflation in food and alcohol drinks fell to 3%, down from 3.7% in the year to March.

The fall in food inflation comes as reports emerge that supermarkets are being urged by the government to limit food prices in return for easing regulations.

The Bank of England's job is to keep inflation at 2%. To do so, it can lift or lower interest rates in a bid to change how households and businesses use their money.

When inflation is above its target, it typically puts rates up. This can encourage people to spend less, which helps reduce demands for goods and services and limits price rises.