UK inflation fell sharply in April 2026, reaching its lowest point in over a year as lower household energy bills offset persistent cost pressures elsewhere in the economy.
The Consumer Prices Index rose by 2.8% in the 12 months to April 2026, down from 3.3% in March, according to the Office for National Statistics.
The reading came in below market consensus of 3.0% and is the lowest CPI level since March 2025, bringing inflation back close to the Bank of England’s 2% target.
How the Ofgem Price Cap Cut Reshaped the April CPI Reading
From April 1 to June 30, 2026, Ofgem set the energy price cap at £1,641 per year for a typical dual-fuel household paying by direct debit, a reduction of £117 compared to the previous period.
The annual contribution from electricity, gas and other fuels shifted from positive 0.13 percentage points in March to negative 0.15 percentage points in April.
The ONS attributed this directly to the change in the Ofgem price cap and the lowering of per-unit prices on fixed tariffs.
The 7% fall in the April cap was largely driven by reductions in policy costs, rather than falling wholesale gas prices.
The government had shifted the bulk of renewables obligation costs from domestic bills to general taxation.
Core inflation, which strips out volatile energy and food prices, dropped to 2.5% year-on-year, the lowest reading since July 2021.
Services inflation, a closely watched indicator for policymakers, fell to 3.2% from 4.5% in March, beating expectations of 3.5%.
Food and non-alcoholic beverages also eased, with annual food inflation slowing to 3.0% from 3.7% in March.
Transport costs moderated too, though motor fuel prices climbed sharply amid disruptions from the Middle East conflict.
What the Bank of England Does Next After the April Surprise
At its meeting ending April 29, 2026, the Monetary Policy Committee voted 8-1 to maintain the Bank Rate at 3.75%. One member voted for an increase to 4%.
The MPC noted that the conflict in the Middle East makes prospects for global energy prices highly uncertain.
The softer-than-expected April data opens the door to a rate cut. The Bank said CPI was projected to reach 3.1% in the second quarter and 3.3% in the third quarter, citing higher energy and food prices from the Middle East conflict.
The MPC stated it stands ready to act if necessary to keep inflation on track for its 2% medium-term target.
The next scheduled MPC meeting result will be announced on June 18, 2026.
July’s Energy Price Cap Threatens to Reverse April’s Progress
The relief from lower bills may be short-lived. Energy consultancy Cornwall Insight forecasts bills will rise by £209 to £1,850 a year for a typical dual-fuel household from July, a 13% increase on the current cap.
The firm attributed the rise to wholesale prices climbing sharply after US and Israeli missile strikes on Iran disrupted Gulf energy infrastructure and closed the Strait of Hormuz, a route for around 20% of global oil and gas.
Jess Ralston, Head of Energy at the Energy and Climate Intelligence Unit, warned: “Bills going up again because of war thousands of miles away will be a tough pill to swallow for households still saddled with debt from last time.”
Before the Middle East conflict began, the Bank of England had expected CPI inflation to fall to around 2% from April and remain near that level for the rest of 2026.
Energy market volatility has forced a significant revision to that outlook.
Even with the April cap cut, energy prices remain 35% above their pre-energy crisis levels. Households on tracker tariffs face the greatest exposure when the cap resets.
Key Dates and Milestones
- May 27, 2026: Ofgem announces the price cap level for July to September 2026.
- June 18, 2026: Bank of England MPC announces its next interest rate decision.
July 1, 2026: New Ofgem price cap takes effect, forecast by Cornwall Insight to reach £1,850.
