Inflation leapt to 3.5% in April from 2.6% in March, the Office for National Statistics said, the highest reading since January 2024 and the largest increase between two months since 2022 when inflation was rocketing above 10%.
A Reuters poll of economists had pointed to a reading of 3.3% in consumer price inflation in April. The Bank of England earlier this month projected inflation of 3.4%.
Finance minister Rachel Reeves said she was “disappointed“ by the inflation figures which further reduced the chance of an interest rate cut in the coming months in the eyes of investors.
Sterling rose against the US dollar after the figures were published and was up by almost a third of a cent at 0640 GMT.
“This data should call into question whether there is a cut ... in August,“ Patrick O’Donnell, senior investment strategist at Omnis Investments, said.
Interest rate futures pricing suggested investors saw about 35 basis points of BoE rate cuts by the end of 2025, little changed from Tuesday.
In April alone, services prices leapt 2.2% - the biggest monthly increase in 34 years.
British newspapers had billed last month as “Awful April“ because of increases in gas, electricity and water prices, alongside higher taxes on employers - all of which are likely to push up prices.
Some officials at the central bank disagree with its key assumption that the climb in inflation will not have longer-running effects on pricing behaviour.
A survey of employers published earlier on Wednesday suggested employers were starting to lower their pay increases for staff.
The BoE lowered interest rates by a quarter point to 4.25% on May 8 in a three-way split vote, with two members of the Monetary Policy Committee favouring a bigger cut, and two - including Pill - favouring a hold.
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