Inflation in the UK fell slightly in April, giving a small reprieve to consumers grappling with the cost-of-living crisis, but economists have cautioned that the ongoing turmoil in Iran might reverse the gain quickly.
UK consumer price inflation dipped to 2.8 percent in April from 3.3 percent in March, the lowest since March 2025, according to official data released on Wednesday. This was mostly driven by lower household energy and utility prices as a result of government-backed steps to cut electricity and gas bills.
But analysts warned that despite the falling inflation rate, comfort could be short-lived as the intensifying crisis involving Iran, Israel and the United States continues to push global oil prices higher. The UK has seen fuel prices rise more than 20 percent year-on-year – the fastest increase since 2022 – stoking concerns that inflation will accelerate again later in the year.
The decline in inflation was less than expected by the markets and briefly weighed on the British pound as investors scaled back their expectations for more interest rate rises from the Bank of England. Economists say the central bank now has a tricky balancing act between reining in inflation and supporting growth.
The UK government also said it would extend its fuel duty cut until the end of 2026 to help protect customers from rising prices at the pump associated with the Middle East situation. It is part of a wider package to reduce pressure on transport and logistics sectors already dealing with increasing energy prices.
Meanwhile, wider economic signs point to the British economy staying shaky. The latest labour market data revealed falling job vacancies and muted pay increases. Manufacturers continue to report rising production costs stemming from higher oil and raw material prices.
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