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Energy prices set to fall further after bill cuts drag down inflation

Published 22/05/2024, 12:21
© Reuters Energy prices set to fall further after bill cuts drag down inflation

Proactive Investors - Energy prices are expected to fall further over the coming months after lower bills were key in keeping down inflation during the year to April.

ONS figures on Wednesday showed the consumer price index climbed by 2.3% in the year to April, against 3.2% to March and 8.7% a year earlier.

This was largely due to falling gas and electricity prices of 27.1% and 37.5% respectively, after Ofgem’s price cap was reduced from £1,928 to £1,690 at the start of April.

Analysts expect Ofgem to cut the cap even further when the regulator announces the latest price for July this Friday.

Cornwall Insight predicted last week the price cap, which determines how much suppliers can charge per unit of energy, would fall by 7% in July to £1,574.

This would slash £500 off the average annual bill compared to last summer, consultant Craig Lowrey said at the time.

AJ Bell analyst Danni Hewson commented food and energy costs had “caused such misery over the past couple of years”, following Russia’s invasion of Ukraine in early 2022.

Lowery added the latest reduction in bills would offer “further relief” as a result, as the fall strips out another former driver of higher consumer prices.

That said, prices could start to rise again heading into the colder winter months, according to Cornwall Insight, with the National Institute of Economic and Social Research predicting a coinciding uptick in inflation later this year.

Read more on Proactive Investors UK


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