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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 rose by 3.2% in the year to March 2024 - the lowest rate since September 2021. | Prices in the UK rose by 3.2% in the year to March 2024 - the lowest rate since September 2021. |
However, as this is above the Bank of England's 2% target, it decided not to cut interest rates - which are used to control inflation - in May. | However, as this is above the Bank of England's 2% target, it decided not to cut interest rates - which are used to control inflation - in May. |
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 removed. | This "basket of goods" is regularly updated to reflect shopping trends, with vinyl records and air fryers added in 2024, and hand sanitiser removed. |
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. |
The main inflation measure used is called the Consumer Prices Index (CPI), external. | The main inflation measure used is called the Consumer Prices Index (CPI), external. |
One reason CPI fell to 3.2% in March was due to a drop in price for food items like meat, crumpets and chocolate biscuits. | One reason CPI fell to 3.2% in March was due to a drop in price for food items like meat, crumpets and chocolate biscuits. |
What is core inflation? | What is core inflation? |
The Bank of England also considers something called "core inflation" when making decisions about interest rates. | The Bank of England also considers something called "core inflation" when making decisions about interest rates. |
This excludes the price of energy, food, alcohol and tobacco - which can change often - to provide a comprehensive picture of price rises. | This excludes the price of energy, food, alcohol and tobacco - which can change often - to provide a comprehensive picture of price rises. |
Core inflation was 4.7% in March. | Core inflation was 4.7% in March. |
Why are prices still rising? | Why are prices still rising? |
Soaring food and energy bills were the main causes of the UK's recent high inflation. | Soaring food and energy bills were the main causes of the UK's recent high inflation. |
Oil and gas were in greater demand after the Covid pandemic, and prices surged again when Russia invaded Ukraine, cutting global supplies. | Oil and gas were in greater demand after the Covid pandemic, and prices surged again when Russia invaded Ukraine, cutting global 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. |
Inflation hit 11.1% in October 2022, the highest rate for 40 years. | Inflation hit 11.1% in October 2022, the highest rate for 40 years. |
The rate has fallen significantly since then but that doesn't mean prices are falling - just that they are rising less quickly. | |
One reason that inflation has remained high is that worker shortages have made it more expensive to find and keep staff, external. | One reason that inflation has remained high is that worker shortages have made it more expensive to find and keep staff, external. |
Why inflation is worse for some people than others | Why inflation is worse for some people than others |
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 |
How much are prices rising for you? Try our calculator | How much are prices rising for you? Try our calculator |
Why does putting up interest rates help to lower inflation? | Why does putting up interest rates help to lower inflation? |
The Bank of England target is to keep inflation at 2%. | The Bank of England target is to keep inflation at 2%. |
With inflation well above that level, the Bank of England increased interest rates to 5.25%. | |
The theory is that if you make borrowing more expensive, people have less money to spend. They may also choose to save more. | The theory is that if you make borrowing more expensive, people have less money to spend. They may also choose to save more. |
In turn, this reduces demand for goods and slows price rises. | In turn, this reduces demand for goods and slows price rises. |
But it is a balancing act - increasing borrowing costs risks harming the economy. | |
For example, homeowners face higher mortgage repayments, which can outweigh better savings deals. | For example, homeowners face higher mortgage repayments, which can outweigh better savings deals. |
Businesses also borrow less, making them less likely to create jobs. Some may cut staff and reduce investment. | Businesses also borrow less, making them less likely to create jobs. Some may cut staff and reduce investment. |
Can government claim credit for a fall in inflation? | Can government claim credit for a fall in inflation? |
Can government claim credit for a fall in inflation? | Can government claim credit for a fall in inflation? |
When will inflation and interest rates go down? | When will inflation and interest rates go down? |
In May, the Bank of England held rates at 5.25% for a sixth time. | In May, the Bank of England held rates at 5.25% for a sixth time. |
Governor Andrew Bailey said the BoE needed to "see more evidence" that price rises had slowed but that he was "optimistic that things are moving in the right direction". | |
He said the BoE expected inflation to fall "close" to its 2% target in the next couple of months. | |
What are UK interest rates and when will they fall? | What are UK interest rates and when will they fall? |
What are UK interest rates and when will they fall? | What are UK interest rates and when will they fall? |
What a falling inflation rate means for your finances | What a falling inflation rate means for your finances |
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 growing faster than rising prices, official figures show, but pay is not increasing as quickly as it was. | |
Pay, excluding bonuses, grew by 6% in the first three months of 2024, compared with the same period a year before. | |
After taking inflation into account, it means pay went up by 1.9%. | |
Five tips when asking for a pay rise | Five tips when asking for a pay rise |
Five tips when asking for a pay rise | Five tips when asking for a pay rise |
How to get a job: Six expert tips for finding work | How to get a job: Six expert tips for finding work |
How to get a job: Six expert tips for finding work | How to get a job: Six expert tips for finding work |
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 seen inflation and higher interest rates. | Many other countries have also seen inflation and higher interest rates. |
But even at 3.2%, UK inflation remains higher than in the EU. | But even at 3.2%, UK inflation remains higher than in the EU. |
The annual inflation rate for countries using the euro was 2.4% in April, the same as in March. | |
The European Central Bank raised its key interest rate to a record high 4% in September and has left it there. | The European Central Bank raised its key interest rate to a record high 4% in September and has left it there. |
In the US, inflation hit 3.5% in March and the US central bank kept its key interest rate at between 5.25% and 5.5%. . | In the US, inflation hit 3.5% in March and the US central bank kept its key interest rate at between 5.25% and 5.5%. . |
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 |