L’argent, le moteur des marchés
UK inflation: underlying softening
28 mai 2025
UK April inflation numbers were much less bad than reported.
Annual headline and core CPI inflation rose by 0.9 pp and 0.4 pp respectively from March, to 3.5% and 3.8%. These increases, however, were entirely attributable to hikes in government-controlled prices and vehicle excise duty (VED).
Water and sewerage charges rose by 26% in April versus 8% a year earlier, boosting annual headline and core rates by 0.18 pp and 0.23 pp respectively.
“Other services for personal transport equipment” – a category dominated by VED – rose by 19% versus 4% a year ago, adding 0.22 pp and 0.28 pp to headline and core rates.
The household energy price cap was raised by 4.7% versus a 12.4% fall in April 2024, boosting the headline rate by 0.65 pp.
Summing the above, official actions added 1.05 pp to the headline rate and 0.51 pp to core – more than the actual March-April increases.
Accordingly, the adjusted core rate calculated here fell from 3.2% in March to 3.1%, equalling its recent low (in December and September 2024) – see chart 1.
Chart 1
This measure, moreover, takes no account of Easter timing effects, which may have further inflated the April outturn. For example, air fares rose by 27% last month versus 7% in April 2024, implying a 0.13 bp lift to annual core.
Underlying softening is consistent with lagged money trends and sterling appreciation – the effective rate is currently 3% above its 2024 average level and 7% higher than in 2023.
The MPC is concerned that another inflation pick-up, although unrelated to monetary policy, will generate “second-round” effects. Still-subdued money growth, currency strength and a weakening labour market argue for a relaxed view.
