Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

Investment Institute
Market Alerts

UK Reaction: UK Inflation hits peak of 9%

  • 19 May 2022 (3 min read)

  • CPI inflation rose to 9.0% (y/y) in April – a new 40 year high - from 7.0% in March compared to consensus expectations of inflation rising to 9.1%.
  • We see Aprils figure as the peak in inflation, but we expect it to remain elevated in 2022, before a gradual return to target in 2023. We now expect inflation to average 7.4% and 3.5% in 2022 and 2023, respectively.
  • Increases in the price of energy drove the surge in inflation following the 54% increase in the Ofgem cap on energy. Price rises were broader than just energy, with services and food inflation contributing strongly to the rise. 

CPI surged to 9.0% (y/y) in April from 7.0% in March, setting a new 40-year high. This reading came a touch below consensus estimate of a 9.1% rise. This marks the highest level of inflation since 1982. Core CPI inflation (excluding food, energy, tobacco and alcohol prices) also rose to 6.2% (from 5.7% in March), in line with the consensus forecast. RPI measures of inflation also rose sharply, RPIX rose to 11.2%. 

Increases in the price of energy drove the surge in inflation following the 54% increase in the Ofgem cap on energy prices on 1st April. Rises in gas and electricity prices alone contributed 1.4ppts to the 1.9ppt rise. Services also contributed to the rise, with communication services increasing by 0.1ppts due to changes to internet and mobile phone bills indexed to RPI and the hospitality sector adding 0.1ppts where the jump likely reflected the end of pandemic related tax reductions. Food price inflation also contributed to the rise (0.1ppt), with rising food prices, a key upside risk to inflation in the coming months. Falls in the price of clothing slightly offset the rise (-0.1ppt). 

We expect this month’s print to be the peak in inflation and expect a slow decent from this peak over the coming months, but this is sensitive to the evolution of gas prices ahead of the October price cap. This inflation outlook continues to weigh on households and business, which we expect will be one of the largest hits to real income impacting the economy. We now expect inflation to average 7.4% and 3.5% in 2022 and 2023, respectively.

We continue to expect that the Monetary Policy Committee (MPC) will hike rates in their next meeting in June and once again in August brining rates to 1.50%. We expect them to then pause their hiking cycle as demand weakens and slack begins to emerge in the labour market. This remains far short of market expectations, which expect rates to reach 2% by end 2022.  


    This press release should not be regarded as an offer, solicitation, invitation or recommendation to subscribe for any investment service or product and is provided for information purposes only. No financial decisions should be made on the basis of information provided.
    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.
    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document.
    Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.
    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 22 Bishopsgate London EC2N 4BQ. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.