Why has inflation jumped higher and what does it mean for households?

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation hit 3.5% in April, up from 2.6% in March and the highest since January 2024.
Here, the PA news agency looks at what the latest inflation data means for households and the economy.
– What is inflation?
Inflation is the term used to describe the rising price of goods and services.
The inflation rate refers to how quickly prices are going up.
April's inflation rate of 3.5% means that if an item cost £100 a year ago, it would now cost £103.50.
– Why did inflation rise by so much last month?
The steep rise in inflation since March was the largest since October 2022, at the height of the energy crisis.
Economists had expected inflation to increase sharply in April due to the so-called 'awful April' flurry of bill rises, although the increase in the Consumer Prices Index (CPI) was bigger than most had forecast.
It comes after Ofgem's energy price cap rose by 6.4% in April, having fallen a year earlier, alongside a raft of bill rises for under-pressure households, including steep increases to water charges, council tax, road tax, mobile and broadband tariffs.
Ofwat ruled that water firms could increase bills by an average of 20% (Dominic Lipinski/PA)
Water bills soared after regulator Ofwat allowed firms to increase bills by an average of £86 or 20% for this year as part of its five-year agreement.
Millions of households will also have seen a jump in their annual council tax bills from April 1, with most local authorities in England increasing a typical band D bill by 5%.
But experts have also said inflation is likely to have also been pushed higher as many firms hiked prices in response to the Government's move to raise national insurance contributions (NICs) and the minimum wage last month.
– How much of the rise in inflation is down to the leap in labour costs?
The ONS data did not specifically reveal the impact of the NICs increase or separate it out from the other factors leading to the rise.
But it is thought some of the general increase in prices was driven by the wage cost pressures, for example, with food and non-alcoholic drinks inflation rising to 3.4% last month – the highest since March 2024.
Kris Hamer, director of insight at the British Retail Consortium, said: 'Rising inflation was inevitable following the wave of additional costs hitting employers and particularly retailers, who employ more than 3 million people across the country.
'For months, retailers have been warning that rising costs would lead to higher prices.'
It's not yet clear what long-term effects US President Donald Trump's global trade tariffs will have on prices and the economy (Niall Carson/PA)
– Will inflation keep rising?
While painful for many, some economists believe that inflation may have peaked at 3.5%, although the path is far from clear.
The Bank of England recently said CPI was on track to peak at 3.5%, but it did not see that happening until the third quarter of this year.
It is unclear what impact US President Donald Trump's global trade tariffs will have on prices and the economy, or what will happen to UK wage growth, a key driver behind inflation.
Pantheon Macroeconomics believes inflation will stay at around 3.5% for the rest of 2025 and not fall below 3% until April next year.
Investec Economics expert Philip Shaw is more optimistic, as he believes wage growth and lower energy prices over the summer will bring CPI down.
'In addition, the punitive US tariffs levied on Chinese goods may help to lower UK price pressures further as manufacturers in China compete more aggressively to seek alternative export markets,' he said.
– What does the it mean for interest rates?
Typically, high interest rates are used as a method to drag on spending demand and therefore bring down inflation.
The higher-than-forecast inflation figures may therefore see the Bank of England act more cautiously in cutting rates further, according to some experts.
Having cut rates to 4.25% from 4.5% earlier this month, the Bank is now seen pausing further reductions until its next quarterly set of forecasts in August.
Crucially, it will want to see services inflation come down after hitting 5.4% in April, as well as a further cooling off in wage growth.
James Smith, an economist at ING, said services inflation was 'still too high for many of the Bank of England's rate-setters'.
'But we think an August cut is still highly likely, and the quarterly pace of rate cuts can continue through this year and into 2026.

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