UK inflation surged to 3.5% after interest rate cut, central bank faces dilemma!

UK inflation unexpectedly soared to 3.5% in April, far exceeding expectations, breaking a trend of two consecutive months of decline. Core inflation also rose from 3.4% to 3.8%, with pressure concentrated in areas such as housing, transportation, and entertainment.

Particularly striking was the water bill, which skyrocketed by 26.1% in a single month, the largest increase in over 30 years, further burdening households. Electricity and gas prices are also continuing to rise, becoming the main drivers of inflation.

The Chancellor expressed disappointment at the data, stating that the cost of living pressure remains heavy. Economists pointed out that adjustments to energy price caps, tax reforms, and holiday factors collectively drove this unexpected surge.

This has put the Bank of England in an awkward position: just a few weeks ago, it cut interest rates to 4.25%, and now the inflation rebound has led some members to question whether the rate cut was premature. Future rate cut plans may be impeded as a result.

Although GDP showed an unexpected increase in the first quarter, analysts warn that this may be a temporary stimulus, and the economy still faces challenges. The market generally believes that the central bank will have to be more cautious going forward, as inflation pressures have not eased, and there may be little room left for rate cuts.