UK inflation dip only temporary relief from Iran war impact

Added: 2026-05-26

[00:00:00]British inflation cooled more than expected in April, marking its lowest reading since March 2025, but the dip did little to mask a tough outlook for households with global costs from the Iran war set to hit them harder later this year.

[00:00:15]Official data showed consumer prices rose by an annual 2.8% down from March's annual inflation rate of 3.3% and lower than economists' expectations of a slowdown to 3%. The figures were helped by measures to lower energy and utility bills. However, analysts have dubbed this short-lived and expect a rise in inflation to around 4% later this year.

[00:00:40]It adds to the pressure on Prime Minister Keir Starmer, who is facing challenges to his leadership from within his Labour Party. Britain sets household energy bills through a quarterly government price cap, which fell in April. That depressed the inflation reading even as global prices move in the opposite direction. Most major forecasters, including the International Monetary Fund, still expect Britain to end 2026 with the fastest inflation in the G7.

[00:01:06]The energy price shock from the war prompted the Bank of England to increase sharply its inflation forecasts, saying it could hit 6.2% in its most extreme cases.

[00:01:17]UK Finance Minister Rachel Reeves is expected to announce further support for households on Thursday.