UK inflation has surged to its highest level since early 2024, with CPI rising to 3.5% in the year to April 2025, according to new data from the Office for National Statistics (ONS). The increase, though widely anticipated due to seasonal cost hikes, still came in higher than most forecasts. The unexpected jump was largely driven by a raft of early April price increases hitting households—ranging from higher utility and council tax bills – especially water and sewerage costs- to mobile and broadband charges—placing further strain on already stretched family budgets.
For financial advisers, today’s inflation print is more than a headline statistic. It carries implications for client sentiment, investment strategy, and the future path of interest rates.
A surge that stings
Danni Hewson, head of financial analysis at AJ Bell, said the jump didn’t come out of nowhere: “Everyone knew it was coming. We all got those emails and brown envelopes from mobile providers, water companies and energy suppliers, but the jump in headline CPI to 3.5% was higher than expected.”
She added that although rising benefits and wages may have softened the blow for some, “for households still trying to put the pieces back together after years of price hikes, all those bill increases coming at once will have been pretty tough to take.”
While retailers offered pockets of relief—cutting prices on some clothing and fuel—the picture ahead is clouded by uncertainty. “What people really want to know is what happens next,” Hewson said. “Markets have pretty much priced out any chance of a June rate cut, and are only factoring in a 40% chance that rate setters will make a move in August.”
Perfect storm of policy and price resets
Rob Morgan, chief investment analyst at Charles Stanley, called April an “awful” month for inflation. “It marks the largest year-on-year increase in prices since January 2024,” he noted. Key drivers included new fiscal year-related price hikes in energy, water, council tax, and employer costs.
Morgan warned that a particular area of concern was services inflation, which rose to 5.4%. “The Bank of England will be monitoring whether additional employment costs might lead to wider and more sustained price rises.”
He added: “Sticky core and services inflation could mean there are only one or two more quarter-point interest rate cuts to come this year.”
Household finances under renewed pressure
With households already grappling with mortgage costs and grocery bills, rising inflation poses a fresh challenge for consumers and, by extension, for advisers seeking to reassure clients about their long-term plans.
Lindsay James, investment strategist at Quilter, said that while some factors, like energy prices, were expected to rise in April, “the dataset also marks the first month of what could be a higher-than-hoped for inflationary period.” She noted that the FTSE 100 has been struggling as a result, with sterling strengthening amid expectations of interest rates staying higher for longer.
Trump tariffs and political uncertainty add complexity
Some analysts point to global developments—particularly renewed US tariff activity under President Trump—as a complicating factor in the inflation picture.
Abhi Chatterjee, chief investment strategist at Dynamic Planner, said: “The cause of the increase could be attributed to the inflationary budget of the Labour government or the uncertainty created by Trump tariffs on global supply chains depending on the side of the political fence one is on.”
He urged caution about over-interpreting a single data point, warning that “policy effects are felt with lags” and that the broader inflation trajectory still matters more than the monthly jump.
Long-term savers in the firing line
For long-term savers, the return of rising inflation is a cause for renewed concern. Alexandra Loydon, director of advice at St. James’s Place, highlighted growing anxiety among the public, with 25% of respondents in recent research saying they feel anxious about the year ahead.
“With rates on easy access accounts starting to fall significantly, today’s inflation figure is expected to mark the start of a prolonged period of inflation above 3%,” she said, urging savers to shop around for competitive rates.
Lily Megson, policy director at My Pension Expert, added that repeated inflation shocks are undermining confidence in retirement planning. “Inflation hikes have been the persistent thorn in the side of financial planning for years now,” she said. “Government, financial services and employers all have a role to play in delivering greater clarity and better financial education.”
Mixed signals and central bank caution
From an investment perspective, the data complicates the outlook for UK interest rates and asset allocation. Daniele Antonucci, CIO at Quintet Private Bank, said the latest rise in inflation was driven by “specific, policy-related factors,” including the increase in Ofgem’s price cap and employer NI contributions.
He noted that these are largely one-off effects, but that today’s data “might lower the Bank of England’s confidence that inflation… is falling to target.” However, the firm still maintains a preference for short-dated gilts and overweight positions in UK equities as a defensive play.
Others warned that the path for monetary policy could become more contentious. Derrick Dunne, CEO of YOU Asset Management, said: “Considering the MPC has just cut its base rate, there is now cause for conflict at the Bank of England which could prove embarrassing.”
Jeff Brummette, CIO at Oakglen Wealth, added: “This has confirmed the logic behind rate setters’ go-slow approach to cutting the base rate earlier this month.”
Implications for advisers
Today’s inflation print serves as a stark reminder to advisers that the path to stable pricing is far from assured. It also reinforces the need for careful portfolio positioning, active cash management, and empathetic client communications during a time of heightened financial anxiety.
As inflation continues to bite, advisers will need to help clients recalibrate their expectations—not only about returns, but about what short-term discomfort may be required on the road to long-term financial resilience.
What about Mortgage and Property markets?
Want to find out what Mortgage and Property Experts have been thinking after today’s inflation print? Read our summary here https://ifamagazine.com/inflation-spike-rattles-mortgage-market-can-rates-hold-in-june-reaction/
