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| What is the UK inflation rate and how does it affect me? | What is the UK inflation rate and how does it affect me? |
| (1 day later) | |
| Prices in the UK are no longer rising as fast as wages, official figures show. | Prices in the UK are no longer rising as fast as wages, official figures show. |
| However, inflation of 4% in January was still significantly above the Bank of England's target, meaning knock-on effects for interest rates. | However, inflation of 4% in January was still significantly above the Bank of England's target, meaning knock-on effects for interest rates. |
| What does inflation mean? | What does inflation mean? |
| Inflation is the increase in the price of something over time. | Inflation is the increase in the price of something over time. |
| For example, if a bottle of milk costs £1 but is £1.05 a year later, then annual milk inflation is 5%. | For example, if a bottle of milk costs £1 but is £1.05 a year later, then annual milk inflation is 5%. |
| How is the UK's inflation rate measured? | How is the UK's inflation rate measured? |
| The prices of hundreds of everyday items, including food and fuel, are tracked by the Office for National Statistics (ONS). | The prices of hundreds of everyday items, including food and fuel, are tracked by the Office for National Statistics (ONS). |
| This "basket of goods" is regularly updated to reflect shopping trends, with vinyl records and air fryers added in 2024, and hand sanitiser taken out. | This "basket of goods" is regularly updated to reflect shopping trends, with vinyl records and air fryers added in 2024, and hand sanitiser taken out. |
| The ONS looks at price changes over the previous 12 months to calculate inflation. | The ONS looks at price changes over the previous 12 months to calculate inflation. |
| One reason for January's 4% inflation figure was a rise in the cost of gas and electricity costs, it said. | One reason for January's 4% inflation figure was a rise in the cost of gas and electricity costs, it said. |
| The main inflation measure used is called the Consumer Prices Index (CPI). | The main inflation measure used is called the Consumer Prices Index (CPI). |
| The Bank of England also looks at "core inflation" when making decisions about interest rates. | The Bank of England also looks at "core inflation" when making decisions about interest rates. |
| This excludes the price of energy, food, alcohol and tobacco - which can change often - to get a closer picture of price rises. | This excludes the price of energy, food, alcohol and tobacco - which can change often - to get a closer picture of price rises. |
| Core inflation was 5.1% in January. | Core inflation was 5.1% in January. |
| Why are are we still seeing big price rises? | Why are are we still seeing big price rises? |
| Up to now soaring food and energy bills have been the main cause of high inflation. | Up to now soaring food and energy bills have been the main cause of high inflation. |
| Oil and gas were in greater demand after Covid and prices also surged when Russia invaded Ukraine, cutting supplies. | Oil and gas were in greater demand after Covid and prices also surged when Russia invaded Ukraine, cutting supplies. |
| The conflict also reduced the amount of grain for sale, pushing up food prices. | The conflict also reduced the amount of grain for sale, pushing up food prices. |
| It led to inflation hitting 11.1% in October 2022, the highest rate for 40 years. | |
| The rate has fallen since then, but lower inflation doesn't mean prices are falling - just that they are rising less quickly. | The rate has fallen since then, but lower inflation doesn't mean prices are falling - just that they are rising less quickly. |
| Most things will cost more than they did before. | Most things will cost more than they did before. |
| One reason for the UK's stubbornly high inflation rate is that worker shortages are pushing up the cost of hiring and retaining employees. | |
| Why inflation is worse for some people than others | Why inflation is worse for some people than others |
| How much are prices rising for you? Try our calculator | How much are prices rising for you? Try our calculator |
| What is the state pension and the triple lock? | What is the state pension and the triple lock? |
| What can be done to lower inflation? | What can be done to lower inflation? |
| The Bank of England's target is to keep inflation at 2%. | The Bank of England's target is to keep inflation at 2%. |
| With inflation remaining much higher than that, the Bank increased interest rates to 5.25%. | |
| The theory is that by making borrowing more expensive, people will have less money to spend. They are also encouraged to save more as saving rates increase. | The theory is that by making borrowing more expensive, people will have less money to spend. They are also encouraged to save more as saving rates increase. |
| In turn, this reduces demand for goods and slows price rises. | In turn, this reduces demand for goods and slows price rises. |
| But it's a balancing act - by increasing borrowing costs there is a risk of harming the economy. | But it's a balancing act - by increasing borrowing costs there is a risk of harming the economy. |
| For example, homeowners face higher mortgage repayments, though they can get better deals on savings. | For example, homeowners face higher mortgage repayments, though they can get better deals on savings. |
| Businesses also borrow less, making them less likely to create jobs. Some may cut staff and not invest. | Businesses also borrow less, making them less likely to create jobs. Some may cut staff and not invest. |
| Can government claim credit for a fall in inflation? | Can government claim credit for a fall in inflation? |
| When will inflation go down? | When will inflation go down? |
| The Bank of England has predicted that inflation will fall further in 2024, and has indicated it is edging towards cutting interest rates. | |
| As a result, interest rates could be cut early in the summer, economists have suggested. | As a result, interest rates could be cut early in the summer, economists have suggested. |
| What a falling inflation rate means for your finances | What a falling inflation rate means for your finances |
| Are wages keeping up with inflation? | Are wages keeping up with inflation? |
| Wage growth is currently outpacing price rises, official figures show, but pay is not rising as quickly as it was. | Wage growth is currently outpacing price rises, official figures show, but pay is not rising as quickly as it was. |
| Pay, excluding bonuses, grew by 6.2% in the last three months of 2023 compared with the same period a year before. | Pay, excluding bonuses, grew by 6.2% in the last three months of 2023 compared with the same period a year before. |
| Several industries, including rail, healthcare and education, have gone on strike over pay. | Several industries, including rail, healthcare and education, have gone on strike over pay. |
| The government has argued that big pay rises could push inflation higher because companies might increase prices as a result. | The government has argued that big pay rises could push inflation higher because companies might increase prices as a result. |
| Will pay rises for doctors and teachers cause inflation? | Will pay rises for doctors and teachers cause inflation? |
| What is happening to inflation and interest rates in Europe and the US? | What is happening to inflation and interest rates in Europe and the US? |
| Many other countries have also been experiencing a cost-of-living squeeze and higher interest rates. | Many other countries have also been experiencing a cost-of-living squeeze and higher interest rates. |
| But UK inflation remains higher than in the EU and US. | But UK inflation remains higher than in the EU and US. |
| The annual inflation rate for countries using the euro is expected to be 2.6% in February, down from 2.8% in January. | |
| In the US, inflation hit 3.2% in February, up very slightly from 3.1% in January. | |
| Why is inflation higher in UK than other countries? | Why is inflation higher in UK than other countries? |
| The European Central Bank raised its key interest rate to a record high 4% in September, and has left it unchanged since. | |
| At its January meeting, the US central bank kept its key interest rate at between 5.25% and 5.5% for the fourth time. | |
| Related Topics | Related Topics |
| Economics | Economics |
| Personal finance | Personal finance |
| Inflation | Inflation |
| Cost of Living | Cost of Living |
| UK economy | UK economy |
| Bank of England | Bank of England |
| Pay | Pay |