LONDON, May 20 (Reuters) – British consumer price inflation slowed to 2.8% in April from 3.3% in March, according to official figures published on Wednesday.
Economists polled by Reuters had mostly expected inflation to soften to 3.0%, in large part due to the big increases in utility and other regulated prices in April last year falling out of the annual comparison.
Before the U.S.-Israeli war on Iran began on February 28, the Bank of England said inflation in Britain – the highest among the Group of Seven economies for much of the last four years – was likely to be close to its 2% target in April.
But the energy price shock from the war prompted the BoE to increase sharply its inflation forecasts which, it says, could hit 6.2% early next year under its most inflationary scenario.
British finance minister Rachel Reeves is expected to announce on Thursday more measures to help reduce the cost of living, including a possible cancellation of a fuel duty increase which is due to come into effect in September.
The finance ministry is also pressing supermarket chains to introduce voluntary price caps on key food products in return for easing some regulations, two people with knowledge of the situation said on Tuesday.
The key question for the BoE’s interest rate-setters is whether the expected rise in headline inflation creates longer-term price pressures in the economy.
Several have said the weak jobs market could make it harder for workers to demand higher pay and for businesses to pass on higher costs.
Preliminary data from the tax office published on Tuesday showed a sharp fall in people in payrolled employment and weaker pay growth. Wage settlement figures published earlier on Wednesday pointed to a slowdown in pay growth too.
Financial markets on Tuesday were betting on two quarter-point interest rate rises by the BoE this year, with a chance of a third. A Reuters poll of economists published last week showed most expected no change in rates in 2026.
(Writing by William Schomberg; Editing by Sarah Young)
