Brits are enduring a higher inflation explosion for most of this year, as many household bills jump next month, a revival of household-sluggish living costs in recent years.
Next month, the average annual energy bill is set to rise by 6.4% when the price cap is reset. Regulated water bills average above 26%. At the same time, prices for services such as broadband internet and mobile phones, which are often associated with inflation, have risen by about 6%, which have been reset at the start of a new fiscal year.
April is also the start of the new tax year, with employers facing higher taxes on employee wages.
The UK's annual inflation rate is expected to peak at 3.7% in the third quarter of this year, accelerating from 3% in January. The central bank, which held interest rates at 4.5% on Thursday, has been cautious about its approach to lowering interest rates due to signs of stubborn price pressure, including prospects such as stubborn wage growth and increased government spending this year.
There was evidence that inflation rates are back to the bank's 2% target, but the uncertainty facing policymakers has increased significantly in recent weeks as the threat of the world trade war and European governments are rapidly rethinking their budgets to respond to the rise in spending on defense.
“There is a lot of economic uncertainty at this point,” Bank of England governor Andrew Bailey said in a statement Thursday. Policymakers are looking at the changes in the national and global economy “very closely,” he added.
“No matter what happens, it's our job to make sure inflation is low and stable,” he said.
Policymakers have been cut by three-quarters since last summer, and the relatively slow pace of easing has been eased as inflation has moved away from the central bank's 2% target. In comparison, eurozone policymakers have cut 1.5 percentage points. The Federal Reserve was cut by 1 percentage point last year, but US officials have warned that higher tariffs could slow inflation back to targets.
Bank of England policymakers said they would take a “gradually prudent approach” to lower rates, but they expected it to be “a path of gradually decreasing.”
Inflation is expected to be slow again towards the end of the year, but minutes from the central bank meeting this week said policymakers will “take great attention to the signs that are the result of more permanent inflationary pressures.”
Next week, Exchequer Prime Minister Rachel Reeves will be providing updates on the government's tax and spending plans.
“There's still more to do to ease the cost of living,” Reeves said Thursday, adding that he “fought every day to spend more money on workers' pockets.”
“In a changing world, we are determined to go even faster to begin growth, protect the working people, and bring about a new era of stability, security and updates that keep our country safe,” she said.
There was good news for the British. Data released Thursday showed that the UK average salary continued to surpass inflation. This is a trend that began about two years ago. Next month, living wages across the country will rise by nearly 7%, improving wages for low-wage workers.
“People are better in 2025 than in 2024,” said Adrian Pabst, deputy director of public policy at the National Institute for Economic and Social Studies. “There's a recovery in living standards and inflation is worsening compared to the worst living crisis.”
However, he added that many households have yet to fill the income shortage since the pandemic following the surge in inflation. For the poorest 40% of households, that recovery will not be complete until next year.
