Price rises have accelerated to 3.5%\u00a0according to the Office for National Statistics\u00a0(ONS) Consumer Price Index (CPI) measure of inflation for April 2025, released on 21 May 2025.This means that, year-on-year, the cost of a range of goods and services is now 3.5% higher than the same period 12 months ago. It is a 0.9% jump from March 2025\u2019s figures, which showed 2.5% CPI inflation.<\/p>\n
Inflation is now at its highest level since March 2024.<\/p>\n
The increase is higher than anticipated from the Bank of England and casts some doubt on the pace of interest rate cuts its Monetary Policy Committee (MPC) is likely to make this year.\u00a0The Bank of England\u2019s own chief economist, Huw Pill, who is a member of the MPC\u00a0has warned\u00a0the pace of cuts is likely to be too quick. The latest inflation figures appear to corroborate his view.<\/p>\n
Why has inflation increased?<\/strong><\/p>\n The main issues stem from annual bill increases that took effect in April, such as council tax hikes and other areas, including rises in the Ofgem energy price cap.<\/p>\n But so-called \u2018core inflation\u2019 \u2013 which strips out more volatile prices such as food, energy, alcohol and tobacco \u2013 also showed a strong increase to 3.8%, up from 3.4%. Similarly, services inflation rose from 5.4% to 5.8%.\u00a0The figures underscore the difficult position of the Bank of England, which is looking to balance higher price rises against lacklustre economic growth in the UK economy.<\/p>\n Investors are\u00a0now \u2018pricing in\u2019 just 0.35% more bank rate cuts in 2025 \u2013 far short of earlier predictions which saw the rate falling to 3.5% (it is currently 4.25%). This could lead to changes in pricing for certain financial products, such as mortgage providers pulling back on cutting their offered rates.\u00a0Inflation persisting higher than expected could also hamper the Bank\u2019s efforts to support economic growth, as its mandate to manage price rises takes precedence.<\/p>\n What does this mean for your finances?<\/strong><\/p>\n The Bank of England is adamant that the current bout of rising inflation\u00a0is down to one-off pressures that won\u2019t persist over the rest of the year, particularly because\u00a0major input prices such as\u00a0energy costs and\u00a0oil\u00a0are falling, which should ease pressure in time.\u00a0It is impossible to accurately predict how the Bank of England will shift its approach now, but what is clear is major finance providers are\u00a0slashing rates. This is good for mortgage holders looking to find a cheaper deal, but bad news for savers.<\/p>\n Savings are now in danger of languishing on rates that don\u2019t stay ahead of inflation. This means looking at alternatives such as investing is more pressing than ever to ensure portfolios are given the best opportunity for long-term growth.<\/p>\n","protected":false},"excerpt":{"rendered":" Price rises have accelerated to 3.5%\u00a0according to the Office for National Statistics\u00a0(ONS) Consumer Price Index (CPI) measure of inflation for April 2025, released on 21 May 2025.This means that, year-on-year, the cost of a range of goods and services is now 3.5% higher than the same period 12 months ago. It is a 0.9% jump from March 2025\u2019s figures, which showed 2.5% CPI inflation. Inflation is now at its…<\/p>\n