20 May 2026
If you are covering the latest UK inflation statistics, please find below a comment from Lindsay James, investment strategist at Quilter:
“Inflation in the UK eased considerably to 2.8% year on year in April, down from 3.3% in March in a positive sign for the government. While still comfortably above the Bank of England’s 2% target, there is some comfort for consumers that the energy price cap fell 7% in April as costs relating to renewable energy support mechanisms moved from domestic energy bills to general taxation. While this respite is clearly welcomed, it will be short lived as the energy price cap is expected to rise nearly 13% in July as higher underlying energy costs, caused by Donald Trump’s decision to again attack Iran, are included in the next calculation. It was also noted that motor fuel saw a large increase, underscoring the potential threats that still lurk for consumers and businesses and thus we should prepare for this month to be an outlier and inflation to spike once more.
“The price of gas for future delivery has risen around 50% in the past 12 months as the ongoing shutdown of the Strait of Hormuz is leaving reserves under increasing pressure and sharply increasing costs of fertiliser, something which heavily relies on gas for the production of nitrogen as well as other key chemical inputs. This is already creating problems for the agricultural sector and impacting food prices, with food inflation still coming in at 3% albeit down from the previous month, but this is likely to worsen in coming months without a swift agreement.
“However, it is not all a one-way street. Whilst supply chains are again being disrupted, rising unemployment is creating a headwind for wage growth, dampening the impact on the large services sector. Whilst yesterday’s painful labour stats were an unwelcome development in the overall health of the UK economy, it may limit the number of rate rises that will be needed to anchor long term inflation expectations. That said, even if interest rate rises are not delivered, the recent spike in government bond yields, factoring in not only the risk of higher prices but also political risks, is already pushing up borrowing costs for many. The squeeze on household finances looks set to continue, making any sort of growth in the second half of the year harder to come by.”
