Consumer price inflation jumped to 3.5% in April, plunging all of us back into the cost-of-living crisis.
Inflation stood at 3% in January, then slipped to 2.8% in February and declined again in March to 2.6%.
So today’s print is a massive jump – and bigger than the 3.3% figure expected.
Part of this is down to “awful April”, the annual phenomenon where a string of household bills increased.
We can’t really blame Reeves for the 6.4% jump in the Ofgem energy cap – that’s partly down to her cabinet colleague Ed Miliband’s net zero charge.
Large hikes to water bills, council tax, broadband, mobile tariffs and TV licences aren’t really her fault either.
But April’s spike was also fuelled by Reeves’s autumn Budget tax raid, most notably the rise in employer’s National Insurance contributions.
This will cost businesses £25billion, and they will pass on the much of the cost to customers, by hiking prices.
The Chancellor’s decision to hike the national minimum wage by an inflation-busting 6.7% drives up prices for the same reason.
Both came into force in April. Hence today’s nightmare. It’s only the start.
The Bank of England has recently predicted inflation would hit 3.5% later in the summer. Reeves has brought that forward.
The inflation jump is a disaster for pensioners living on fixed incomes, as it will squeeze their spending power in real terms.
Many top up their state pensions using the interest on their savings accounts, but their cash deposits are being eaten away by inflation too.
It’s bad news for savers generally – even relatively modest inflation can reduce the purchasing power of their deposits.
At 3.5% a year, it reduces the value of £10,000 by starting £350 in just 12 months. Savers must shop around for the best possible interest rate to counteract that.
Naturally, it’s bad news for mortgage borrowers too, because the Bank of England will now be reluctant to cut interest rates below today’s level of 4.25%.
Now for the really worrying part.
Reeves had an unexpected piece of good economic news recently, pretty much the first I can remember since she took over as Chancellor last July.
The economy grew by 0.7% in the first three months of the year, a solid jump after stagnating for the first six months on her watch.
But there’s a catch.
Although she took the credit for it, the increase wasn’t really down to her, but a weird one-off factor.
The GDP rise was fuelled by companies racing to ship goods to the US before President Donald Trump’s “liberation day” tariffs announcement on April 2.
That made our economy look stronger than it was, and it’s about to go into reverse.
US companies have stocked up on UK made goods, so I can take it easy for a while. And while we have some kind of trade deal, courtesy of Keir Starmer, our goods will still carry a minimum 10% tariff that they didn’t incur before.
That will hit subsequent sales – and that GDP growth number.
In fact, we may get no growth at all in the second quarter, that’s exactly the same time as inflation is rising more than expected.
It’s the ultimate nightmare for Rachel Reeves – but my sympathies lie elsewhere.