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UK inflation rose more than expected to 3.5 per cent in April, underlining the Bank of England’s challenge as it considers when to press ahead with lowering interest rates.
Wednesday’s figure from the Office for National Statistics surpassed both the 3.3 per cent predicted by analysts polled by Reuters and March’s 2.6 per cent.
The rise was driven by higher energy costs after regulators raised the household price cap as well as a jump in water bills, the ONS said. Stronger airfares also contributed.
Services inflation, a key measure of underlying price pressures for rate-setters, climbed to 5.4 per cent in April, eclipsing analysts’ forecasts of 4.8 per cent and March’s figure of 4.7 per cent.
The BoE reduced rates by a quarter-point this month to their lowest level since 2023 amid signs of easing inflation.
But the Monetary Policy Committee was split over the decision. On Tuesday, chief economist Huw Pill said he feared the BoE was reducing rates too rapidly and that the momentum behind falling inflation was “stuttering”.
Chancellor Rachel Reeves’ increase in employer national insurance contributions was also expected to stoke price pressures.
But the BoE still expects inflation to subside late this year after reaching 3.7 per cent in September, falling back to the central bank’s 2 per cent target in 2027.
Following the release of April’s figure, the pound strengthened, up 0.4 per cent against the dollar at $1.344.
This is a developing story
www.ft.com
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