UK Inflation Expected to Dip to 3% as Energy Cap Cut Offsets Fuel Surge

UK inflation is projected to have slowed to 3% in April 2026, down from 3.3% in March, primarily driven by a 7% reduction in the Ofgem energy price cap. This decrease, resulting from government measures shifting renewable costs to general taxation, helped offset a significant surge in fuel prices. However, economists warn that this relief may be temporary. The ongoing conflict between the US-Israel alliance and Iran has caused Brent crude oil prices to average around $120 per barrel, leading to a roughly 15% jump in petrol prices in April. Experts, including those from Deutsche Bank and Interactive Investor, caution that inflation momentum could pick up again as the energy shock fully impacts consumer data. Household energy bills are forecast to rise sharply by July, with predictions of a 12% increase in the next price cap. Consequently, while inflation eased slightly, the Bank of England maintains higher interest rate expectations, noting that the Middle East conflict prevents inflation from returning to the 2% target as previously anticipated.