London, United Kingdom. British inflation cooled more than expected in April, with annual consumer price growth easing to 2.8%, but economists warned the outlook for households remains difficult as global costs linked to the Iran war could add pressure later this year.
Inflation falls below forecasts
Consumer prices rose by an annual 2.8%, down from 3.3% in March, according to official data. It was the lowest reading since March 2025.
Economists polled by Reuters had mostly expected inflation to soften to 3.0%.
Energy and regulated bills help ease price growth
The slowdown was helped by smaller increases in household energy and other regulated utility bills than in April 2025, and by measures to lower energy bills introduced by finance minister Rachel Reeves.
Britain sets household energy bills through a quarterly government price cap, which fell in April and depressed the inflation reading, even as global prices moved in the opposite direction.
Markets react as rate expectations shift
Sterling dipped briefly against the dollar and the euro after the Office for National Statistics published its data before largely recovering. Investors reduced their bets on the Bank of England raising interest rates in the coming months.
Economists warn pressures could rebuild
Anna Leach, chief economist at the Institute of Directors, said the improvement could be short-lived as the impact from the Middle East conflict builds, with motor fuel prices rising at the fastest pace since the Ukraine war.
Economists expect inflation to rise to around 4% later this year, adding to pressure on Prime Minister Keir Starmer as he faces challenges to his leadership from within his Labour Party.
Britain’s inflation position in the G7
Britain recorded the highest annual inflation rate among the Group of Seven nations for 10 consecutive months until April, when the United States took that position.
Most major forecasters, including the International Monetary Fund, still expect Britain to end 2026 with the fastest inflation in the G7.
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