Inflation jumps to 3.5 per cent as higher household bills continue to squeeze lower-income households

CPI inflation increased sharply in April – rising to 3.5 per cent up from 2.6 per cent in March – mostly driven by rises in energy and water bills and exceeding expectations of markets and the Bank of England. While painful, this higher level of inflation does not represent a return to peak cost of living pressures, according to the Resolution Foundation today (Wednesday).

The rise in April was 0.2 percentage points above market expectations and brought inflation to its highest level since January last year – it also represents the biggest rise since CPI increased by 1 percentage point to peak at 11.1 per cent in October 2022.

Energy bills are the key force behind this rise – accounting for nearly 0.6 percentage points of the increase – with electricity and gas inflation set to reach its highest level in almost two years (since July 2023) and previous falls dropping out of the 12-month comparison. The price of electricity, gas and other fuels rose by 6.7 per cent in the year to April 2025 as the Ofgem price cap increased by £111.

But today’s release doesn’t signal a return to peak cost of living pressures with inflation expected to fall later in the year. That is partly because today’s rise reflects some erratic and one-off factors. Data collection happened during the Easter holidays, creating unusually large upward contributions from airfares and recreation and culture.

Further downward impetus to inflation is expected from lower goods-price inflation as oil prices have fallen by around 15 per cent since President Trump’s ‘Liberation Day’ tariffs were announced.

And despite swings in energy prices, measures of underlying domestic inflationary pressure should continue to ease. Services inflation and core inflation have fallen from peaks of 7.4 and 7.1 per cent to 5.4 and 3.8 per cent respectively. Continued falls are expected in these measures in the coming months and should allow the Bank of England to continue cutting rates.

But for families still recovering from the cost of living crisis, even a short-lived rise will be difficult to absorb. The Resolution Foundation warns that struggling households remain a key concern with energy bills comprising nearly twice as much of the total consumption of poorer households in 2022-23, compared with high-income households (11 per cent compared to 6 per cent).

James Smith, Research Director at the Resolution Foundation, said:

“Inflation increased by 0.9 percentage points in April reaching 3.5 per cent, its highest level since January last year and the biggest rise since CPI peaked at 11.1 per cent in October 2022.

“This rise was almost entirely driven by rising gas, electricity and water bills, as the higher cost of essentials continue to exert a greater pressure on the budgets of lower-income households.

“But this is not a return to peak cost of living pressures as energy inflation is forecast to drop in the autumn, the rate of services inflation should continue to ease, and falls in globally-traded goods are expected. All this means the rise in inflation should prove to be short lived.”