United Kingdom CPI Inflation Rate: Data, Forecast & Trends

The Consumer Prices Index (CPI) rose by 3.5% in the 12 months to April 2025, a notable increase from the 2.6% recorded in March 2025. This figure, released by the Office for National Statistics (ONS), marks the highest inflation rate since January 2024. The rise was larger than many analysts had anticipated and signals a pause in the previous downward trend that saw inflation fall from a 41-year high of 11.1% in October 2022. The Bank of England's target for inflation remains at 2%.

This resurgence is primarily attributed to rising household energy bills, reflecting the increase in the Ofgem energy price cap introduced in April 2025. While the current rate is significantly below the recent peak, this upward movement presents a renewed challenge for policymakers and households alike.

Examining the individual components of the CPI reveals the specific drivers behind the headline rate in the 12 months to April 2025:

• Housing and Household Services: This category provided the largest upward contribution to the annual inflation rate. Specifically, prices for electricity rose by 4.6% (compared to an 8.8% fall in the year to March) and gas by 12.2% (compared to a 12% fall in the year to March). Regulated water bills also increased. In contrast, actual rents for housing saw a slower pace of increase at 6.3%, down from 7.2% in March.
• Transport: This sector also saw an acceleration in price rises, with annual inflation at 3.3%, up from 1.2% in March. This was influenced by the introduction of Vehicle Excise Duty on electric vehicles and increases in airfares.
• Food and Non-Alcoholic Beverages: Food inflation continued its upward trend, rising to 3.4% in April from 3.0% in March. Key contributors were meat, mineral water, bread and cereals, and sugar and jam.
• Recreation and Culture: Prices in this category rose by 3.1% in the year to April, up from 2.4% in March, with foreign holidays being a notable factor.
• Clothing and Footwear: This was one of the few categories exerting downward pressure, with prices falling by 0.4% in the year to April, a reversal from the 1.1% rise seen in March, as more items were on sale.
• Restaurants and Hotels: Inflation in this sector remained elevated, contributing to the overall rise.

The ONS highlights that the CPIH (Consumer Prices Index including owner occupiers' housing costs) all goods annual rate rose from 0.6% to 1.7%, while the CPIH services annual rate rose from 5.4% to 5.8%. This broad-based increase, particularly in services, points to persistent underlying inflationary pressures.

On a monthly basis, the CPI rose by 1.2% in April 2025, a significant increase compared to the 0.3% rise in April 2024 and the 0.3% rise between February and March 2025.

The largest upward contributions to the monthly change came from:

• Housing and Household Services: Primarily driven by the aforementioned increases in electricity, gas, and water bills.
• Transport: Higher motor fuel prices and airfares contributed.
• Recreation and Culture.

This sharp monthly increase underscores the immediate impact of regulated price rises and ongoing service sector inflation.

UK inflation averaged 2.5% in 2024, the softest average rate since 2020. This reflected the impact of the Bank of England's high interest rates plus benign global commodity prices. That said, the rate was still somewhat about the Bank's 2% target, kept elevated by stubborn services inflation.

The UK's inflation journey has seen distinct phases:

• The "Great Moderation" (early 1990s - 2007): Following the high inflation of the 1970s and 1980s, this period was characterised by relatively low and stable inflation, generally hovering around the Bank of England's 2% target after it gained operational independence in 1997.
• Post-Global Financial Crisis (2008-2012): 2008 a temporary spike in inflation, driven by factors like rising commodity prices and changes in VAT. This was followed by a period where inflation fell back.
• Post-Brexit Referendum (2016-2018): The depreciation of sterling following the 2016 referendum pushed CPI inflation above 3% in late 2017 due to higher import costs.
• Pre-Pandemic Lows (2019-early 2021): Inflation remained relatively subdued, often below the 2% target.
• The Pandemic and Energy Crisis Surge (mid-2021 - late 2023): A confluence of factors, including global supply chain disruptions as economies reopened, strong demand for goods, and particularly the surge in energy prices following Russia's invasion of Ukraine, propelled inflation to a 41-year high of 11.1% in October 2022. Food prices also saw dramatic increases. This period was marked by significant ‘‘cost-push' inflation.
• Disinflation Period (late 2022 - early 2025): Aggressive monetary policy tightening by the Bank of England, coupled with easing global energy prices and normalising supply chains, led to a significant fall in the headline inflation rate, reaching 2.6% in March 2025 before the recent uptick.

The UK's historical average inflation rate from 1989 to 2025 was 2.82%. A record low of -0.1% was seen in April 2015.

Headline inflation (CPI) measures the rate of price change for the entire basket of consumer goods and services. Core inflation, however, excludes volatile items such as energy, food, alcohol, and tobacco. It is often seen as a better indicator of underlying, domestically generated inflationary pressures.

In April 2025, the UK's annual core CPI inflation rate rose to 3.8%, up from 3.4% in March. This was its highest reading since April 2024 and exceeded market forecasts. On a monthly basis, core CPI rose by 1.4%, accelerating sharply from 0.5% in March.

The CPI goods annual rate jumped to 1.7% from 0.6% in March, while the CPI services annual rate also accelerated to 5.4% from 4.7%. The persistence and acceleration of core inflation, particularly in the services sector (which is more sensitive to wage pressures), is a key concern for the Bank of England. It suggests that inflationary pressures are becoming more embedded and are not solely due to volatile external factors like energy prices.

• Energy Prices: While the immediate spike is linked to the April Ofgem cap rise, future global energy price volatility remains a significant risk. The OBR's March 2025 forecast already incorporated higher wholesale gas and oil price assumptions for 2025.
• Services Inflation and Wage Growth: The stickiness of services inflation, closely linked to domestic wage pressures, is a primary concern for the Bank of England. Nominal earnings growth is forecast by the OBR to ease from 4.7% in 2024 to 4.3% in 2025, but this is still robust. If wage growth remains elevated, it will be harder for services inflation to fall back to levels consistent with the 2% overall target.
• Monetary Policy: The Bank of England cut interest rates four times from August 2024 to May 2025, bringing the Bank Rate to 4.25% as of May 2025. However, the recent uptick in inflation may lead to a more cautious approach to further easing. Markets have adjusted expectations to price in fewer cuts. The Bank needs to balance controlling inflation with not unduly harming economic growth.
• Geopolitical Factors: Global geopolitical events continue to pose upside risks to inflation, particularly through energy and food supply chains.
• Domestic Demand: The strength of domestic demand will influence firms' ability to pass on costs. Weaker-than-expected demand could lower prices more quickly.

United Kingdom Inflation Data