THE UK's rate of inflation jumped to its highest level in over a year last month.
The Office for National Statistics (ONS) reported that the Consumer Price Index (CPI) rose by 3.5% in the 12 months to April, which is 0.2% higher than economists had expected.
Inflation is a measure of how the price of goods and services is rising or falling, which can affect people's household finances.
The ONS explained that the rise, from 2.6% in March, was due to a sharp increase in energy bills in April, along with higher costs for essentials like council tax and water.
In April, households on the energy price cap faced an unusual 6.4% increase, and council tax bills went up by about 5% for many people.
Millions of households faced an additional £10 per month on their water bills, alongside increases in mobile, broadband, and TV costs last month.
Experts also believe inflation may have risen further because many businesses increased their prices after the government raised national insurance contributions (NICs) and the minimum wage last month.
ONS acting director-general Grant Fitzner said: "Significant increases in household bills caused inflation to climb steeply.
"Gas and electricity bills rose this month compared with sharp falls at the same time last year due to changes to the Ofgem energy price cap.
"Water and sewerage bills also rose strongly this year, as did vehicle excise duty, which all pushed the headline rate up to its highest level since the beginning of last year."
Today's figure is well above the Bank of England's 2% target and puts pressure on under-fire Chancellor Rachel Reeves.
The CPI, which measures inflation, is carefully monitored because higher inflation makes it harder for the Bank of England to lower interest rates.
The base rate influences interest rates that lenders offer on savings and borrowing, including mortgages.
The Bank had significantly increased interest rates since December 2021 to address the early stages of the cost of living crisis.
However, earlier this month, it lowered the base rate for the fourth time since 2020 to boost economic growth.
At the time, markets priced in three more cuts this year - which would take the base rate to 3.5% by the end of 2025.
However, the latest inflation figures will be watched closely for clues as to when the Bank of England may look to cut rates again.
Chancellor Rachel Reeves said: "I am disappointed with these figures because I know cost of living pressures are still weighing down on working people.
"We are a long way from the double-digit inflation we saw under the previous administration, but I'm determined that we go further and faster to put more money in people's pockets.
"That's why we have increased the minimum wage for millions of working people, frozen fuel duty to protect commuters and struck three trade deals in the past two weeks that will go towards cutting bills."
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we're earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
Rising inflation reduces people's spending power because things cost more.
Core inflation, which excludes volatile items, also increased, driven mainly by higher household bills like energy and water.
Businesses are passing on increased employment costs to consumers, contributing to inflation.
Rising inflation means prices will rise faster, pushing up grocery and household bills.
The Bank of England may keep interest rates higher for longer to control inflation, which could mean that mortgage rates will rise again.
Rob Wood, at Pantheon Macroeconomics, said he believes inflation will stay around 3.5% for the rest of the year.
He said: "We think the Monetary Policy Committee will have to proceed cautiously.
"We stick with two more rate cuts this year, but are very close to reducing that to only one."
However, this isn't guaranteed.
If economic growth remains slow, the Bank could continue to lower interest rates to encourage spending and investment, helping to give the economy a much-needed boost.
The base rate is currently set at 4.25%, and the Bank of England's Monetary Policy Committee will next review its level on June 19.
Wage growth is also slowing, and job insecurity is rising and this puts more pressure on personal budgets.
While energy bills may fall in the summer, many households are still struggling.
It's important to review budgets, cut wasteful spending, and manage debt.
Homeowners and first-time buyers may be discouraged as interest rate cuts could slow down.
Savers need to be aware that higher inflation reduces the value of their returns.
It's important to secure good savings deals now and consider tax-efficient savings strategies like ISAs to protect savings from tax.
Myron Jobson, senior personal finance analyst at interactive investor, said: "While the increase might come as a shock to households, it’s important to remember that CPI inflation is an annual measure, comparing prices to what they were a year ago.
"Britons should approach headline inflation figures with perspective. Everyone has an inflation rate that is unique to them, depending on their individual spending habits.
"It's crucial to focus on maintaining financial resilience in uncertain times – whether by reviewing budgets, building up emergency savings, or managing debt – to better weather any bumps along the road ahead."
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