Month-on-month inflation in the UK gathered pace in April, coming in at 1.2%, the highest it’s been since October 2022. However, annualised inflation slowed to 8.7%, from 10.1% in March, reflecting significant ‘base effects’, as last April’s rise in electricity and gas prices falls out of the annualised number.

Also, Core Inflation (the change in the costs of goods and services excluding food and energy) rose 6.8% in the 12 months to April 2023, up from 6.2% in March, which is the highest annual rate since March 1992.

Commenting on the data, Nicholas Hyett, an investment analyst at Wealth Club, said: “As we lap the dramatic spike in energy prices following the Russian invasion of Ukraine, some decline in annualised inflation was inevitable. As a result, year-on-year price growth is now out of double figures – albeit still eye watering at 8.7% and higher than economists had hoped. 

“However, the devil’s in the detail. The energy shock may be fading, but month-on-month inflation is higher in April than it has been at any time since last October as communication, transport, alcohol, tobacco and food prices continue to rise. Core inflation, the kind of price rises that are created by the UK domestically, rather than forced upon the country by global energy and food prices, is at the highest it’s been in over 20 years.

“All this means it remains too early to celebrate victory in the Bank of England’s war against inflation. (These) numbers probably strengthen the case for higher interest rates at the next MPC meeting, and that means the pain will continue for consumers and businesses alike.”

Charles White Thomson, CEO at Saxo UK, says the inflation rate highlights the failings by the Bank of England (BoE), adding: “The status quo in the UK is increasingly painful and uninspiring - this should not be about celebrating falling inflation or the avoidance of a technical recession. We are now in an economic danger zone, pincered between inflation, a 19% increase in food and non-alcoholic beverages which reaffirms the cost of living crisis, and a consumer saddled with outsized debt that was once cheap. The risk for further policy failure is real and the stakes are getting increasingly high.

“In an attempt to remove the politics and infighting, I prefer to continue referring to the UK as a PLC. My resounding conclusion from the UK PLC’s recent financial statement – or budget – is that it is effectively in a financial straitjacket with constraints including: £2.4trn public debt and all the servicing costs this entails, tax to GDP levels approaching record highs or 37.5%, and corporation tax moving to 25% from 19% for financial year 2023/24.” 

Andy Mielczarek, founder and CEO of SmartSave Bank, says: “In the current climate, the majority of easy-access savings accounts will not be able to keep pace with inflation, meaning that a significant number of people are seeing their money losing value in real terms. Worse still, our research shows that a worrying percentage (97%) of the UK’s savers are relying on current accounts alone to house their money, while uptake for different savings products – from ISAs to fixed-rate bonds – is low across the board.”

Giles Coghlan, chief market analyst, consulting for HYCM, said: “For the Bank of England and Governor Bailey - who indicated that we would see a much sharper drop in inflation - this is very concerning and reveals that more work still needs to be done to bring inflation down to the BoE’s 2% target. As such, the markets are pricing in two further interest rate hikes in the months to come, with a potential terminal rate of 5.2% in the summer.”

However, Jatin Ondhia, CEO at Shojin, was more optimistic, commenting: “The severity of price pressures has left little room for complacency, yet (this) long awaited dip into single-digit figures will no doubt be met with a sigh of relief from investors. For the first time in eight months, evidence that a corner has been turned appears more tangible and following the IMF’s upgrade to the UK’s growth forecast, the emergence of a more positive tone will be welcomed by many.

“That being said, there is no escaping the fact that the economy still faces a long road to recovery. With inflation figures set to stay above the Bank of England’s target for longer than anticipated, it remains to be seen whether further, tighter monetary policy may be needed. There might be a sense of cautious optimism, but investors should continue to assess how well placed their portfolio is to deliver on their short-, medium- and long-term goals, with the challenges of inflation and higher interest rates unlikely to dissipate this year.”