As the Office for National Statistics has reported this morning:
- The Consumer Prices Index (CPI) rose by 2.8% in the 12 months to April 2026, down from 3.3% in the 12 months to March.
- On a monthly basis, CPI rose by 0.7% in April 2026, compared with a rise of 1.2% in April 2025.
- Housing and household services made the largest downward contribution to the monthly change in CPI annual rates; an upward contribution from a large increase in motor fuel prices was counteracted by downward effects from other categories in the transport division.
I think we can have no doubt that Rachael Reeves will be jumping up and down with glee this morning as a consequence of this, claiming credit for the fall, even though she has outsourced control of inflation to the Bank of England.
The reality behind this fall is, however, that most of it is technical. In April 2025, the index rose exceptionally, and in April 2026, the run was much smaller, so a decline in the index this month was always going to happen. Everyone who follows these things and has worked out just how crude this inflation index really is already knew that.
But that said, the index has fallen. I cannot deny that this is the reported data. However, I should draw attention to three things.
The first is that this is backwards-looking information. It records what has supposedly happened (and I use the word supposedly very wisely, because these things are subject to revision), and it does not imply what will happen.
Secondly, the world has changed now. We know that fuel shortages are imminent. We know that food shortages are on the global agenda due to the crisis in the Gulf and a shortage of fertiliser supplies. And we know that other raw materials are in Short supply. Even Martin Wolf in the Financial Times has finally woken up to the reality of these facts this morning. As the saying goes, the proverbial is about to hit the fan, and that fact is not reflected in this index.
Thirdly, it is reasonable to note that just before the global financial crisis hit in 2008, politicians and the Bank of England were assuring everyone that there was no crisis developing. If Rachael Reeves now likes to claim that inflation is under control, she will be as delusional as they were then.
Do not, in other words, be confused by this data. As financial advisors are keen to say, past performance is no indication of future expectations, and that is most certainly true in this case. Just because inflation is a little better at the moment does not mean we have not got a full-blown economic meltdown coming our way.
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Ostriches and sand come to mind when viewing what main stream economics commentators predict. How foolish to ignore the effects of the Middle East genocide and war, not to mention the growing inequality and climate crisis.
If the inflation figure has reduced then, presumably, the BoE will reduce the base rate?
Oh but, they will say, we’re looking forward using our exquisite analytical tools, our Dynamic Stochastic General Equilibrium models, the Philips curve, the NAIRU, which have worked so well in the past, and we see an inflationary outlook. So we need to raise interest rates. And, nevermind, that the effects of that rise will not be seen for more than a year. And, nevermind, that the inflationary shock will have passed by then. We’ll go ahead and raise interest rates. There is no alternative.
P.S. that’s supposed to be ironic.
I do the weekly Aldi shopping in our household.
The bill is rising. Fast.
Last week, my (meat free) trolley cost the same as one a fortnight or so earlier with 2 rolled joints of brisket in it (bought for our monthly church Sunday lunch).
Reeves needs to go back to Leeds, and chat to people in Aldi, Lidl and Asda (and the food bank). Fa***e can give her a lift in his helicopter. She could then tour the estate agencies.
Looking @ bond markets (for a range of reasons). What strikes me is the low rates of interest 2, 3, 4% this applying as much to gov bonds as to the better quality corporates. Inflation is likely to kick-off (as noted) given events in the Straits of Hormuz, & the imbeciles in various central banks will do what they usually do (crank interest rates) which will cause bond prices to tank. So, damned if you do, damned if you don’t (out of equities and into the not-so-safe-haven of bonds where if you buy now, capital looses will crank). Other problem, looking @ Euronext, not many bonds are traded actively (= not much liquidity). None of this is intended as financial advice to anybody – but rather to show that given the combo of rising interest rates and probable stock market crash it all looks quite horrible – oh & add in wall-to-wall incompetants at the helm in finance ministries and central banks (obvs their lifestyles will continue – regardless – bless). Puzzled in Bruzzles
One can only agree with you, Richard. So, how do we get individuals to discern the difference between “nominal” (fixed) retirement income and “real” (increasing) retirement income? I find it astonishing that so many people buy fixed annuities in their 60s, as do the FCA and the annuity providers, as it happens.
Moshe Milevsky used the helpful example of eggs, using an annual income of £1,000. “Imagine you bought 1,000 eggs in year one, with each egg costing £1. If the real price of eggs remains steady and you have average inflation of 2%, then by year 25, you could only buy 606 eggs (assuming inflation for eggs is 2%) with your £1,000. And if inflation hovers around 4%, you will be down to 367 eggs. Now, you may personally not care about eggs and would be happy to buy fewer of them over time, but the point is that this analogy applies to everything you consume, from petrol to plan tickets, to prescription medication to pet food”.
Entirely agredd
I have an RPI annuity
A wise decision, Richard, one that you will not regret.
As an aside, I fairly recently arranged one of these for a chap with a purchase price of c.£650,000 and my proposed fee was £1,950. “You have the business”, he said, “because another IFA wanted to charge me about £19,500 (3%) for the same amount of work”. I was amazed at the audacity of asking for so much money! The moral of this story is to watch out for the emergence of “price gouging” in the annuity market, which I suspect is on the increase. (In truth, I understand that any annuity provider would strongly query such a high fee and ask for written confirmation from the customer to confirm this extraordinary amount – they have “decency limits”). Watch out for kites being flown, folks!
Let’s say that you have £1000 which you leave under the mattress for a year. You lose 4% or $40 of purchasing power over the year if inflation is at the 4% level. In double entry accounting someone has gained from that. The hoarder of cash doesn’t have the power to buy $40 of eggs a year later, but someone does.
Is that right?
Sure the £1000 is now worth less. But I don’t think anyone else is better off as a result.
What I think has happened is that some value has been destroyed, but that is different from money being destroyed. In this case money is not a very good store of value.
My understanding is that MMT teaches that money can only be created and destroyed by government spending or taxation (fiat currency) and, I would say, that the requirement for double entry bookkeeping is consequence. I don’t think there is anything that says value cannot be destroyed (?).
As far as I can see, inflation destroys value in the economy. It doesn’t destroy money. Effectively this means there is less money in the economy, or perhaps more accurately, the total value of all the money is less. Unless something is done this would be deflationary. To avoid this the government needs to inject more money into the economy, either by buying gilts (which creates more central bank reserves) or, better, by creating more money though spending. I say better because government spending tends to help many people whereas buying gilts only seems to help those who already have money.
But, hey, perhaps I’m mistaken. Does someone have a different perspective?
You are much nearer the truth, Tim
Please tell me I’ve got this wrong. Earlier in the year, there was a newspaper report that while food and energy costs had risen, it was offset by a drop in the cost of air flights which meant that the rate of inflation was stable, and therefore the Bank of England would not have to raise interest rates.
This seems pretty random, especially for people who can’t afford holidays. But do major economic decisions really rely on a single figure for inflation? (Benefits, pensions, council rents, NHS wages, as well as the interest rate?)
I am helping to organise a couple of family gatherings at Christmas and we are collecting prices from restaurants.
Firstly, everyone is wanting chunky deposits (against no shows because of travel problems?)
And prices are 15-20% up from last year, with some additional reductions in quality eg coffee excluded).
That is the inflation real businesses are expecting.
This said on the day that supermarkets are shown to be wearing the trousers in this government, as they twist the knife and protect their profits above all else.
https://www.bbc.co.uk/news/articles/c5y7qz806q3o
i get sick today going into Tesco fish £7.50, oat milk £2.35 and had to stop buying my favorite cheese due to cost. Having food allergies is breaking not just the bank but me.
We are doomed Mr Mainwaring.
That is my fear
Being pedantic here – there’s a carb meister out their who says “the index has fallen”. It hasn’t although I know what the gentleman means. If you set the index to 100.0 exactly 12 months ago then the index today is 102.8.
Hope for the best but plan for the worst.
It’s autumn here in Tasmania and we’ve decided to plant potatoes, using the clever Welsh method. Thank heaven for small Murphys.
https://www.youtube.com/watch?v=Nb71fC6x9d4