Industry experts have cautioned clients to avoid assuming that the inflation spike is over following news this morning of a significant drop in CPI inflation in April.

CPI inflation fell from 10.1% in March to 8.7% in April, according to today’s latest figures from ONS. 

Financial Planners and wealth managers say they do not expect the drop in CPI inflation to ease the cost of living crisis quickly.

Alexandra Loydon, director of partner engagement and consultancy at St James’s Place, said: “It’s good to see that the UK inflation rate is back in single digits, easing to 8.7% for April. This is largely driven by gas and electricity costs remaining stable, rather than reducing.

"However, it’s clear than food inflation remains troublesome – at over 19%, a 30 year high and a reminder that prices are not falling but that the headline rate is showing a reduction in the scale of the increase. The labour market also remains tight, which in turn puts pressure on employers to increase pay in line with inflation.

“The implications are that as long as the economy can hold up, the Bank of England will keep the option of interest rate rises firmly on the table. This will add to costs for borrowers, including those on variable mortgage rates. As a result, there will be little easing on the cost of living. As for investors, they will need to continue to diversify their portfolios to ensure they are as inflation-proofed as they can be and can reduce risk when markets are volatile.”

According to the Embark Investor Confidence Barometer, only 38% of advisers believe inflation will be brought under control within the next three years.

Rosie Hooper, Chartered Financial Planner at Quilter, said that while inflation appears to be heading in the right direction and interest rates are nearing the peak the "dual impact" of high inflation and high interest rates continue to have a devastating impact on consumers' personal finances.

Wealth managers were also cautious, saying investors need to take a closer look at rising food prices and likely future base rate rises before celebrating.

Rob Morgan, chief investment analyst at wealth manager Charles Stanley, said: “We can now expect a steady descent from multi-decade highs as the largest hump in energy prices passes through the calculations.

“Yet that is where the good news ends. All is not rosy in the UK’s economic garden with inflation coming in consistently hotter than expected, largely thanks to runaway food prices. Exterminating the inflation weed may take time and persistence from the Bank of England and it may mean households and investors getting used to structurally higher interest rates than they have been used to.

“With groceries in particular showing little response to the Bank of England’s twelve successive interest rate rises, today’s figures could well seal a further increase in interest rates at the monetary policy committee’s next meeting on 22 June from the current level of 4.5%.”

Economists also predicted further base rate rises.

George Lagarias, chief economist at Financial Planners and accountants Mazars, said: “Overall, headline inflation remains uncomfortably high and, what’s worse, increasingly dynamic. This could lead to more than the two rate hikes the market, perhaps optimistically, expects.

"Until the Bank of England sees evidence of the vicious price-wage cycle breaking and demand conditions sufficiently tame, we should expect increasingly tighter credit conditions and pressures on consumers and businesses.”

Platforms also warned investors to remain cautious.

Danni Hewson, head of financial analysis at AJ Bell, said: “It will be a relief to many that the UK economy has proved more resilient than expected, including the IMF. But that resilience may come at a cost as it may have provided the exact conditions that inflation needed to creep insidiously into the economic fabric.” 

Sarah Coles, head of personal finance at Hargreaves Lansdown, said energy costs may have dialled down on inflation put the pressure on most people's wallets has actually increased.

“Power price cuts have dialled down inflation. But this doesn’t mean we can afford to relax. Our wallets aren’t under any less pressure than they were last month. With one or two exceptions – including petrol – prices are still rising horribly – and inflation is actually up 1.2% from March. The fall in the annual CPI figure isn’t a sign of widespread price cuts: it comes down to how it’s calculated."