UK Inflation Soars to 3.5%, Driven by Rising Domestic Bills

UK inflation has surged to 3.5% in April 2025, its highest level since January 2024, as rising domestic bills continue to weigh heavily on households. The sharp increase was primarily driven by a 6.4% hike in Ofgem’s energy price cap and a 26.1% spike in water and sewerage bills—the largest rise since 1988. The impact of these increases has been compounded by higher costs for broadband, mobile services, council tax, and TV licenses, placing additional financial pressure on consumers. Core inflation, which excludes volatile food and energy prices, also rose to 3.8%, while services inflation reached 5.7%, surpassing the Bank of England’s forecast of 5%.

Economists had expected a more modest inflation rate of 3.3%, making the 3.5% figure a surprise. A significant contributor to the rise was a £25 billion increase in employers’ national insurance contributions, as well as a 6.7% hike in the minimum wage. These factors, alongside the ongoing cost pressures, led to the sharpest monthly inflation jump since the aftermath of the Ukraine invasion crisis in October 2022. The latest spike underscores the persistent inflationary pressures facing the UK, despite previous efforts to stabilize the economy.

The unexpected inflation increase has prompted the Bank of England to reassess its approach to interest rates. While rate cuts had previously been anticipated, the central bank may now take a more cautious stance, pausing further reductions to evaluate the long-term impact of these inflationary pressures. The news has caused financial markets to react, with the pound climbing to a three-year high against the dollar and short-term gilt yields rising, indicating growing investor concern over the economic outlook. The latest data reinforces the challenges the UK faces in managing inflation while striving for economic recovery.