CPI inflation falls to 2.8%

CPI inflation falls to 2.8%

20 May 2026

Adam Gillespie, Head of DB Trustee Investment at XPS commented: “Today’s fall in CPI inflation to 2.8% was greater than market expectations, despite the Middle East tensions keeping investors alert to fresh shocks in oil and shipping, suggesting that domestic disinflationary forces are having a greater impact for now.

A key driver of the lower figure is the April change to Ofgem’s energy price cap, which reduced household bills and pulled down CPI via lower gas and electricity costs, but stripping out that effect, underlying inflationary pressures may not be easing as quickly as the headline suggests.

The news for DB scheme funding is more positive, driven far more by movements in the gilt market than by any single monthly CPI print. According to our XPS DB:UK analysis, aggregate surplus remains well above £200 billion.

Gilt yields have risen sharply in recent months and investors remain highly sensitive to the risk of sticky UK inflation and the country’s reliance on imported energy - a combination that is helping to keep UK government borrowing costs among the highest in the developed world.

Attention will now turn to Labour’s internal politics and whether any shift in fiscal policy could force markets to reprice both inflation and gilt yields higher. Trustees and sponsors should be alert to these risks and ensure that their hedging strategies have not been knocked off course by the sizeable market moves we have already seen or by further volatility in the months ahead.”