Lower gas and electricity bills behind UK inflation fall to 2.8%

Lower gas and electricity bills were behind a bigger than expected drop in the UK's inflation rate, official figures show.

The rate of inflation, which measures price rises over time, fell to 2.8% in the year to April, down from 3.3% in the year to March.

Energy prices were lower due to the government's energy bill support package and lower wholesale energy prices before the Iran war, the Office for National Statistics (ONS) said.

However, inflation is widely expected to rise through the rest of the year as the US-Israel war with Iran continues to impact the global prices.

A lower rate of inflation does not mean prices are falling across the board, but that prices are rising more slowly than previously.

The drop in inflation occurred despite the rise in fuel prices due to the Iran war. The average price of petrol was 156.8p per litre last month, according to the ONS, the highest since November 2022. Diesel prices rose by more than 30p in April to take the average price to 190p per litre, the highest average since July 2022.

Yael Selfin, chief economist at KPMG, said the 2.8% rate of inflation was "likely as low as it gets for some time".

"We anticipate that inflation will trend higher through much of 2026, heading towards 4% by the end of the year."

Chancellor Rachel Reeves is set to reveal further cost of living support for households in anticipation of higher energy prices coming down the road due to the conflict in the Middle East.

On Wednesday, Reeves said said decisions taken in the Budget last year had "kept inflation down as we deal with global instability".

"We have already taken £117 off energy bills, frozen rail fares, and lifted the two-child limit, and over today and tomorrow I'll set out the next phase of how we will support UK households," she added.

Lindsay James, investment strategist at Quilter said the 7% fall in the energy price cap in April was a positive for consumers, but warned it would "short lived".

James noted the large increase in fuel prices underscored "potential threats that still lurk for consumers and businesses", and the UK should brace for higher inflation.

In a sign of what price rises could come down the line, ONS chief economist Grant Fitzner said the annual cost of "both raw materials and goods leaving factories continued to rise" last month due to higher oil and petrol prices.

Producer input prices - the cost of materials and fuel bought by producers to make goods with - rose by 7.7% in the year to April.

Fitzner said lower water and sewage bills and vehicle tax compared to last year also helped reduced overall inflation.

A slower rate of price increases for food - particularly chocolate and meat products - added to the downward pressure on inflation, he added.

Over the 12 months to April, inflation in food and alcohol drinks fell to 3%, down from 3.7% in the year to March.