Inflation has fallen from 3.3% to 2.8%, raising hopes that the Bank of England could ease rates later this year.

21st May 2026

A bigger-than-expected drop in inflation has increased market expectations that the Bank of England could begin cutting the Bank Rate later this year, although rising oil prices and renewed energy cost pressures continue to cloud the outlook.

The Office for National Statistics (ONS) says CPI inflation fell to 2.8% in the year to April, down from 3.3% in March, which was below many economists’ forecasts.

The decline was driven largely by lower gas and electricity bills after April’s reduction in the Ofgem energy price cap.

However, this had been agreed before oil prices surged following the escalation of the conflict in the Middle East. Food inflation also eased, while package holiday prices fell compared with a year earlier.

Core inflation, which strips out more volatile items such as food and energy, dropped to 2.5%.

Rate cuts

The financial markets are now increasingly betting on future Bank of England Bank Rate cuts following signs that the wider economy is weakening.

Office for National Statistics labour market figures released this week show the UK shed around 100,000 payroll jobs in April. Regular pay growth also slowed slightly, but more slowly than the Bank of England would like

Several major lenders, including Halifax, HSBC and Santander, have reduced selected fixed mortgage rates in recent weeks as they factor in expectations for future borrowing costs.

The latest drop in inflation, however, may prove temporary. Oil and petrol prices have been rising sharply since the conflict in the Middle East intensified, and the energy price cap is expected to increase again in July. It is why some economists are warning inflation could climb back towards 4% later this year.

Industry reacts

Nathan Emerson, CEO of Propertymark, says: “It is very welcome news to see inflation dip this month; however, today’s figures still sit some distance away from the Bank of England’s target rate of 2%. It remains important to consider continued overall uncertainty and unrest globally, and the potential worries and anxieties brought directly into the homes of many consumers regarding their outgoings.

“It remains difficult to precisely foresee potential hurdles many consumers may face over the coming months. It is important that people consider real-world disruption, such as possible higher mortgage rates and increases in energy prices, as the year plays out.”

Ben Allkins, Head of Mortgages and Protection at Just Mortgages, says: “Inflation easing in April certainly feels counterintuitive and is likely explained in part by the lowering of the energy price cap. I think if you speak to people in the supermarket or at the petrol pump, they’re certainly not feeling it as the Iran conflict continues to put pressure on global supply and drive up prices.

“The impact on mortgage rates and broker workloads is well-documented, too. That pressure is still likely to be the norm moving forward, particularly with no resolution to the conflict in sight. Attention will soon turn to the next base rate decision in a few weeks’ time, with opinion still split on the outcome. Could a drop in inflation be enough to stave off any potential hikes for a little longer, particularly with the unexpected jump in unemployment announced this week.

“Across employed and self-employed parts of our business, we have seen clients getting on with the task at hand, which in many cases has meant pushing on with their remortgage. We are still seeing purchase activity, although it continues to lean more towards those needing to move, rather than wanting to. In both cases, it is an important reminder of why brokers are so important and the vital role we play in helping borrowers navigate the market. The priority right now is making sure we are being proactive, maintaining that five-star service and covering all our bases to ensure clients are properly supported.”

Mark Harris, Chief Executive of mortgage broker SPF Private Clients, says: “Inflation softening to 2.8 per cent as a result of lower utility bills is welcome, but the ongoing conflict in the Middle East means the inflationary threat has not rescinded.

“While further interest rate cuts seem unlikely for now, perhaps the need to increase them has reduced, particularly in light of the weaker economy and rising unemployment. This will come as a relief for borrowers already grappling with higher living costs.

“As lenders continue to tweak their mortgage rates downwards on the back of lower Swap rates, this will assist those buyers who are pressing on with their plans regardless of wider geopolitical concerns.”

Samuel Fuller, Director of Financial Markets Online, says: “The inflationary tidal wave many had been expecting appears to have just melted away, and with it some of the fears about looming interest rate rises.

“But before anyone breaks out the champagne, it’s worth remembering there are several statistical reasons for the decline in the headline inflation numbers.

“Annual food inflation has cooled too, down from 3.7% in March to 3% in April. Most importantly of all, core inflation – which strips out volatile factors like food and fuel – fell from 3.1% in March to 2.5% in April – its lowest annual level in nearly five years.

“But the inflationary threat from the war in the Gulf hasn’t disappeared. Fuel price inflation is still running red hot.

“Nevertheless, there is sufficient upside surprise in this data for the Bank of England to hold off on any immediate increase in interest rates.

“Above all, it’s fantastic news for anyone due to remortgage or thinking of buying their first home in the coming months.”

Ben Thompson, Director of Home Moving Strategy, Mortgage Advice Bureau, says: “Our research shows 41% of prospective buyers are currently waiting for a ‘sign’ before making their next move, highlighting how closely housing sentiment is linked to the wider economic picture.

“At the same time, uncertainty isn’t being driven by affordability alone. Nearly a third of prospective buyers admit they don’t fully understand the homebuying process, while 73% are unaware of high loan-to-value mortgage options that could help make homeownership more accessible.”