- April’s inflation reading is set to be released tomorrow (20 May) at 7am
- The latest Office for National Statistics (ONS) data is expected to show that inflation dipped in the year to April, but only because of an unusually high inflation reading in April 2025
- Despite this, the Iran war is still expected to push up prices for Brits as global supply lines continue to operate under strain
- The Bank of England is unlikely to be moved to cut rates if a lower inflation rate is posted tomorrow
| What is inflation? | CPI vs RPI inflation | When will interest rates fall further? | CPI release dates | MPC meeting dates |
Could inflation fall in April?
The conflict in the Middle East is expected to put a damper on the UK economy, hitting GDP growth, interest rates and inflation.
March’s inflation data, which saw a 0.3 percentage point rise on the month, pointed to this.
However, economists at Deutsche Bank say they don’t anticipate inflation to rise again in April’s data – rather, they expect a fall.
This prediction is not because they think the UK economy will be more resilient. It is because of negative base effects on the data.
These are expected to arise as April 2025’s inflation data was unusually high because of a tranche of bill increases.
As CPI inflation is measured as the change in prices over a 12 month period, that means April 2026’s data will be compared with April 2025’s data.
This is expected to result in a brief fall in inflation in April, which is then expected to be reversed in May.
Sanjay Raja, chief UK economist at Deutsche Bank, said he thinks April’s data will show inflation “drop from March as negative base effects drag on the annual price calculation.”
He added: “Put simply, annual price resets won't be as large this year as they were last year – especially in the services basket.
“The bad news? Prices will remain well above the Bank of England's 2% target. Indeed, only three months ago, forecasters, including us, were expecting CPI to drop to around 2% y-o-y in April.”
Deutsche Bank expects inflation to slow to 2.98% in April and then bounce back up in the following months.
Raja added: “Looking ahead, we expect price momentum to pick back up as the Iran shock catches up with the inflation data. Indeed, dual fuel bills won't rise until the summer. Rising food and core goods inflation, we expect, will also push momentum a tad higher.”
How high could inflation go in 2026 and 2027?
In its latest Monetary Policy Summary, the Monetary Policy Committee said inflation could hit a peak of 6.2% by early 2027, under a worst case scenario.
The report described three situations that could occur due to rising prices caused by the conflict in the Middle East.
In Scenario A, inflation would rise to 3.6% at the end of 2026, while under Scenario B, it would hit 3.7% by the end of this year.
However, under Scenario C, inflation could reach as high as 6.2% by the first quarter of 2027, based on energy prices remaining elevated for a prolonged period.
What was inflation in the year to March?
The ONS publishes inflation data monthly, with the March Consumer Price Index (CPI) data released on 22 April.
The data showed inflation rose by 3.3% in the 12 months to March, up from 3% in the year to February. The rising price of motor fuel was the main driver of the increase in the CPI rate, the ONS said.
In February, the Bank of England’s Monetary Policy Committee said inflation would slow to 2.1% by April, but these expectations have been quashed due to the conflict in the Middle East, which has pushed inflation up.
ONS set to publish April’s inflation reading at 7am tomorrow (20 May)
Good afternoon, and welcome to MoneyWeek’s live coverage of April’s inflation figures.
The data is expected to show that inflation dipped in the year to April, but only because of negative base effects as April 2025’s reading was unusually high.
As we approach the release, we will cover the latest forecasts, analysis, and break the news when the figures drop tomorrow morning.