London Daily

Focus on the big picture.
Friday, Jun 20, 2025

Bank of England will not hit panic button yet over rising inflation

Bank of England will not hit panic button yet over rising inflation

Analysis: it will not be long before UK inflation is above the official 2% target

A doubling of the annual inflation rate to 1.5% in April means the UK government’s preferred measure of the cost of living is rising at its fastest rate in more than a year. The lifting of restrictions on the economy mean further increases are nailed on over the coming months and it won’t be long before inflation is above the official 2% target.

This will not come as a surprise to the Bank of England, which predicted as much in its monetary policy report earlier this month. Despite forecasting this year the strongest growth since the second world war, Threadneedle Street sees rising inflation as temporary. It is certainly not hitting the panic button yet.

There are three main reasons why the inflation rate has risen. First, the figure is influenced by what happened this time last year, and in April 2020 prices didn’t rise because the economy was in its first, brutal coronavirus lockdown. What happened back then is no longer having a downward impact on the annual inflation rate.


Second, energy costs have risen for motorists and for domestic fuel users. Rising prices at petrol stations added 0.3 percentage points to the annual inflation rate last month, and the raising of Ofgem’s gas and electricity price cap added a further 0.3 points. Taken together, energy accounts for 75% of the 0.8 percentage point increase in inflation from 0.7% to 1.5%.

Finally, prices rose in sectors of the economy that opened up in April, notably clothing and footwear. Retailers had been offering big discounts during the lockdown but did not feel the need to be so generous as the shops were opened up.

The annual rate of clothing inflation rose from –3.5% in March to +0.5% in April, and similar upward moves in the cost of restaurant meals, accommodation and air fares can be expected as restrictions are gradually lifted on those sectors.

Each month the Office for National Statistics publishes data for core inflation – a measure that strips out food, alcohol, tobacco and energy. This measure, closely watched by the Bank of England, did rise in April but only from 1.1% to 1.3%.

There are some signs from producer prices – which provide early warning signs of inflation to come – of a pickup in industry’s costs. But those would have to feed through into much stronger core inflation for the Bank to really start thinking about a change of policy.

Newsletter

Related Articles

0:00
0:00
Close
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
Plans to Sell Dutch Embassy in Bangkok Face Local Opposition
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump's $5 Million 'Trump Card' Visa Program Draws Nearly 70,000 Applicants
DGCA Finds No Major Safety Concerns in Air India's Boeing 787 Fleet
Airlines Reroute Flights Amid Expanding Middle East Conflict Zones
Elon Musk's xAI Seeks $9.3 Billion in Funding Amid AI Expansion
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Taiwan Imposes Export Ban on Chips to Huawei and SMIC
Israel has just announced plans to strike Tehran again, and in response, Trump has urged people to evacuate
Netanyahu Signals Potential Regime Change in Iran
Juncker Criticizes EU Inaction on Trump Tariffs
EU Proposes Ban on New Russian Gas Contracts
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
UK Home Secretary Apologizes Over Child Grooming Failures
Trump Organization Launches 5G Mobile Network and Golden Handset
Towcester Hosts 2025 English Greyhound Derby Amid Industry Scrutiny
Gary Oldman and David Beckham Knighted in King's Birthday Honours
Over 30,000 Lightning Strikes Recorded Across UK During Overnight Storms
Princess of Wales Returns to Public Duties at Trooping the Colour
Red Arrows Use Sustainable Fuel in Historic Trooping the Colour Flypast
Former Welsh First Minister Addresses Unionist Concerns Over Irish Language
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
France Bars Israeli Arms Companies from Paris Defense Expo
King Charles Leads Tribute to Air India Crash Victims at Trooping the Colour
Jack Pitchford Embarks on 200-Mile Walk to Support Stem Cell Charity
Surrey Hikers Take on Challenge of Climbing 11 Peaks in a Single Day
UK Deploys RAF Jets to Middle East Amid Israel-Iran Tensions
Two Skydivers Die in 'Tragic Accident' at Devon Airfield
Sainsbury's and Morrisons Accused of Displaying Prohibited Tobacco Ads
UK Launches National Inquiry into Grooming Gangs
Families Seek Closure After Air India Crash
Gold Emerges as Global Safe Haven Amid Uncertainty
Trump Reports $57 Million Earnings from Crypto Venture
Trump's Military Parade Sparks Concerns Over Authoritarianism
Nationwide 'No Kings' Protests Challenge Trump's Leadership
UK Deploys Jets to Middle East Amid Rising Tensions
Trump's Anti-War Stance Tested Amid Israel-Iran Conflict
Germany Holds First Veterans Celebration Since WWII
U.S. Health Secretary Dismisses CDC Vaccine Advisory Committee
Minnesota Lawmaker Melissa Hortman and Husband Killed in Targeted Attack; Senator John Hoffman and Wife Injured
Exiled Iranian Prince Reza Pahlavi Urges Overthrow of Khamenei Regime
×