United Kingdom Inflation April 2022

United Kingdom

United Kingdom: Inflation increases to series-record high in April

May 17, 2022

Consumer prices increased 2.51% over the previous month in April, accelerating from the 1.09% rise recorded in March. April's jump was the highest reading since April 1991. This was largely the result of faster growth in food prices and surging housing and energy prices—the latter linked to the lifting of Ofgem’s energy price cap from April. Moreover, prices for restaurants and hotels rose notably as a higher VAT rate on the hospitality sector kicked in from 1 April.

Inflation came in at 9.0% in April, which was up from March’s 7.0% and broadly in line with market expectations. April's reading was the highest inflation rate since our current records began. Meanwhile, the trend pointed up, with annual average inflation coming in at 4.6% in April (March: 4.0%). Lastly, core inflation rose to 6.2% in April, from March’s 5.7%.

Inflation is expected to stay extremely elevated in the coming quarters, and well above the Bank of England’s 2.0% target, due largely to higher energy and food prices, and the rise in VAT. Moreover, Ofgem is likely to increase the energy price cap further from 1 October. That said, political pressure could lead the government to increase fiscal support, which depending on the form it takes could ease price pressures somewhat.

On the implications for monetary policy, Berenberg’s Kallum Pickering said:

“The 9.0% rise in April consumer prices is in line with the BoE’s latest estimate and thus should not change its near-term reaction function or guidance – we continue to expect two more 25bp hikes this year. As the big rise in wages in March was entirely due to outsized bonus pay rather than a sharp acceleration in underlying pay growth, and the big CPI surge is driven by the externally-driven rise in energy prices, BoE policymakers are likely to be less worried by the latest data than some headlines may suggest.”

FocusEconomics Consensus Forecast panelists expect inflation to average 7.1% in 2022, which is up 0.8 percentage points from last month’s forecast, and 3.5% in 2023.


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United Kingdom Inflation Chart

United Kingdom Inflation April 2022 0

Note: Annual and monthly variation of consumer price index in %.
Source: Office for National Statistics (ONS) and FocusEconomics calculations.

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