What is the inflation rate in the UK and why is the cost of living rising?
The pace at which prices are rising has unexpectedly increased, after falling for three straight months.
Shortages of salads and other vegetables have helped push food prices to their highest level in 45 years.
What does inflation mean?
Inflation is the increase in price of something over time.
If a bottle of milk costs £1 but £1.05 a year later, annual milk inflation is 5%.
How is the UK inflation rate measured?
To arrive at an inflation figure, the Office for National Statistics (ONS) tracks the prices of hundreds of everyday items in an imaginary ‘basket of goods’.
The inflation figure for each month shows how much these prices have increased since the same date last year.
You can calculate inflation in different ways, but the main measure is the consumer price index (CPI).
Why are prices rising so fast?
Alcohol prices in restaurants and pubs have also increased.
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Do wages keep up with inflation?
Wage increases for many people are not keeping up with rising prices.
Throughout 2022, the average wage has increased by almost £3 per month.
But when inflation is taken into account, the average wage actually fell 2.4% in the three months to January, compared to the same period a year earlier.
What can be done to fight inflation?
The Bank of England aims to keep inflation at 2%, but the current rate is still more than five times higher.
Its traditional response to rising inflation is to raise interest rates.
This makes borrowing more expensive and may mean that some people with mortgages see their monthly payments go up. Some savings rates are also increasing.
When people have less money to spend, they buy fewer things, which reduces the demand for goods and slows the rise in prices.
Companies are also borrowing less, which makes them less likely to create jobs and may reduce their workforce.
The next interest rate announcement will be on May 11.
But when inflation is caused by factors such as global energy prices, action by the Bank of England may not be enough to slow it down.
When will inflation go down?
Lower inflation does not mean that prices are falling. It just means that they stop increasing as quickly.
What is happening in other countries?
Other countries are also experiencing a squeeze in the cost of living.
Many of the reasons are the same – rising energy costs, shortages of goods and materials, and Covid fallout.
Inflation is also down in the United States, but is still considered high. Prices rose 6% in the 12 months to the end of February, compared to 6.4% in January.