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(Bloomberg) — UK inflation jumped more than forecast to its highest rate in more than a year as households were hit by a raft of price increases during what has been dubbed “awful April” in the British media.
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Increases to energy, water and other administered prices pushed inflation to 3.5% from 2.6%, the Office for National Statistics said Wednesday. It was above the 3.4% forecast by the Bank of England and the 3.3% economists expected.
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Services inflation, watched closely by the BOE for signs of underlying price pressures, accelerated to 5.4% from 4.7%. The central bank had expected a rate of 5%.
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The figures largely reflect a 6.4% increase in the energy cap — the maximum suppliers are allowed to raise prices for gas and electricity. Consumers also faced higher water bills, train fares and local authority taxes as a wide range of basic costs went up.
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The sharp increases coincided with the introduction of a £26 billion ($34.8 billion) boost to the payroll taxes paid by employers and a near 7% rise in the minimum wage, both announced in the October budget. Surveys suggested that a high proportion of firms were planning to raise prices in a bid to protect their margins.
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It leaves inflation well above the 2% target, with the BOE expecting the rate to accelerate further to a peak of 3.7% in September. That’s a fresh blow for Prime Minister Keir Starmer, as households face a renewed cost-of-living squeeze at a time when Donald Trump’s tariffs are weighing on the economic outlook.
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The pickup is expected to prove temporary and the BOE is not anticipating second-round effects where workers and firms respond by raising pay demands and prices. However, with wage growth still stubbornly high, policymakers continue to favor a gradual approach to cutting interest rates.
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—With assistance from Mark Evans, Harumi Ichikura and Joel Rinneby.
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