Key Takeaways
- UK inflation is expected to have risen to 3.1% when the ONS releases Consumer Prices Index data for March on April 22.
- Core inflation, which strips out volatile food and energy prices, is likely to ease slightly, according to FactSet consensus.
- The inflation print will feed into the Bank of England’s thinking on interest rates ahead of the next MPC meeting on April 30.
UK inflation is set to rise in the coming months as the impact of the Iran war begins to filter through to economic data, starting with the Consumer Prices Index release for March, due to be released on April 22.
FactSet consensus expectations are currently suggesting a modest increase in inflation in March to 3.1%, from 3% in February.
Core inflation, which strips out volatile food, energy and alcohol prices, is expected to ease to 3%, down from 3.2% in February.
Wednesday’s CPI data release is the first to cover the period since the outbreak of the Iran war.
The effective closure of the Strait of Hormuz has halted the flow of energy imports from the Gulf region, sparking fears of an inflationary supply shock.
IMF: UK Economy Faces Biggest Hit From Iran War Energy Shock
As a significant energy importer, the UK economy is projected to take the largest hit to growth of the world’s advanced economies as a result of the war, according to the International Monetary Fund.
In its first forecasts since the conflict began, the IMF has cut its UK growth forecast for 2026 to 0.8%, down from the 1.3% prewar expectation.
The IMF also expects UK inflation to remain above 3% in 2026, before falling back to the Bank of England’s 2% target by the end of next year.
Bank of America economists expect inflation to rise to 3.3% in March.
“Higher oil prices will likely feed into motor fuel prices in the March print, while higher gas prices will feed into inflation with a delay in July due to the energy price cap,” says B of A UK economist Sonali Punhani.
UK Economy Beats Expectations in February
Despite the gloomy outlook, the UK economy was in a stronger place than expected before the Iran war. Economic growth data for February, released April 16, beat expectations, growing by 0.5%. Economists had only expected a 0.2% gain in the month, according to FactSet.
However, Luke Bartholomew, deputy chief economist, at Aberdeen says ultimately the GDP release feels “very dated” given all that has happened since February.
“Next week’s inflation and employment data will provide an important early sign of how [the Iran war] shock is playing out, and have much more influence on the path of interest rates than [February’s GDP data].
“But with energy markets having stabilized recently, we think the Bank of England is unlikely to hike interest rates in the near term,” Bartholomew says.
Will the Bank of England Raise Interest Rates in April?
The release will be closely followed by the BoE’s Monetary Policy Committee members, who will make their next interest rate decision on April 30.
At the March meeting, members said they “stand ready” to combat inflation. And speaking to the BBC at the IMF’s spring meeting in Washington, D.C., governor Andrew Bailey said the BoE faces a “very, very difficult” decision at the end of April, though he suggested the central bank won’t rush into hiking rates.
The outlook for the Bank of England’s next move on interest rates will continue to be driven by developments in the Iran war. Following the last BoE meeting, futures markets rushed to price in up to four hikes this year, though expectations were pared back to a single rate rise on news of a ceasefire.
While Morningstar economist Grant Slade expects inflation to remain above target this year, he says that due to the temporary nature of energy shocks on inflation, the odds of a rate hike are overstated.
“We see fears of a rate hike by the BoE as overdone, given the tendency for central banks to ‘look-through’ energy shocks,” he says. “A presently weak labor market further mitigates the risk of rate hikes, in our view.”
However, as the conflict now appears likely to be more drawn out than markets had originally expected, Slade says that may place the one cut he expects in late 2026 at risk.
When Are the Next ONS UK Inflation Releases?
- April 22, 2026.
- May 20, 2026.
- June 17, 2026.
- July 22, 2026.
