UK inflation hits 9%, the highest level in more than 40 years

Daily Currency Update

UK inflation soared to 9% in April – its highest level since 1982 – as the rising cost of gas and electricity pushed household energy bills to record levels. Consumer Price Index rose 2.5% on the month, the biggest monthly increase since 1991, as the cap on household electricity and gas prices was adjusted to reflect the sharp rise in wholesale prices caused by Russia's invasion of Ukraine.

Core CPI, which excludes food and energy prices, also rose strongly by 0.7%, as a reopening economy quickly ran into bottlenecks caused partly by supply chain problems stemming from the pandemic and partly by a skills shortage caused by the loss of EU workers from the workforce.

Labour market figures released yesterday showed that average total wages increased by 7% in March, pushed up by bonus payments to staff and consultants working in the finance, IT, construction, and professional services sectors.

The pound has come under heavy pressure in recent days, not only from inflation but also from government plans to unilaterally change some of the terms of the agreement governing its exit from the European Union. EU officials have warned that it may suspend the whole agreement if the UK goes ahead, leading to the immediate imposition of tariffs on UK goods entering the single market and tighter restrictions on UK businesses.