
The pace of price increases has slowed slightly, but remains elevated despite forecasts of further declines.
Soaring costs for items such as bread, cereal and chocolate mean food prices are rising at their fastest pace in nearly 45 years.
What does inflation mean?
Inflation is the increase in the price of something over time.
If a bottle of milk costs £1, but is £1.05 a year later, then milk inflation is 5% per year.
How is UK inflation measured?
To come up with an inflation figure, the Office for National Statistics (ONS) tracks the prices of hundreds of everyday items in an imaginary “basket of goods”.
The baskets are constantly being updated to keep up with shopping trends, with recent changes adding frozen berries and removing Alcopops.
Monthly inflation figures show how much those prices have risen since this time last year.
You can calculate inflation in a number of ways, but the main “headline” measure is the Consumer Price Index (CPI).
Why are prices rising so fast?
Soaring food and energy costs have helped drive up inflation.
Alcohol prices also rose in restaurants and bars.
Your device may not support this visualization
Are wages not keeping up with inflation?
Many people’s wages cannot keep up with rising prices.
But when inflation is factored in, normal wages actually fell 1.3% in the three months to April compared with a year earlier.
How can raising interest rates help fight inflation?
The Bank of England aims to keep inflation at 2%, but interest rates are currently well above that.
That makes borrowing more expensive and could mean some people with mortgages see their monthly payments increase. Some savings rates will also increase.
When people spend less, they buy fewer things, reducing demand for goods and slowing price increases.
Businesses also borrowed less, reducing the likelihood of job creation and possible layoffs.
The next rate announcement is on June 22.
But the BoE’s actions may not be enough to slow inflation when it is caused by factors such as global energy prices.
When Will Inflation Come Down?
Lower inflation does not mean lower prices. It just means they don’t rise as fast.
When the central bank announced its May interest rate decision, it said headline inflation would “fall sharply from April”, while warning that food price inflation may fall more slowly than previously expected.
It forecast inflation would fall to 5% by the end of 2023, rather than the 4% previously expected.
What is the inflation rate in Europe and the United States?
Other countries have also been experiencing cost-of-living contractions.
Many of the reasons are the same – increased energy costs, shortages of goods and materials, and the impact of Covid.
The European Central Bank has also been raising interest rates in an attempt to reduce inflation in the euro zone. Its benchmark rate is now 3.5%, the highest level in 22 years.
However, it left rates unchanged in June, saying it will take time to assess the impact of rate hikes so far.