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What does inflation mean? Why have prices risen so fast?
Inflation is the increase in the price of Soaring food and energy bills helped drive
something over time. If a bottle of milk costs inflation up. Oil and gas were in greater
£1 but £1.05 12 months later, then annual milk demand after Covid. The war in Ukraine
inflation is 5%. meant less was available from Russia, putting
further pressure on prices. The conflict
How is the UK’s inflation rate measured? also reduced the amount of grain available,
The Office for National Statistics (ONS) pushing up global food prices.
tracks the prices of hundreds of
everyday items in an imaginary
“basket of goods”.

The basket is regularly updated
to reflect shopping trends, with
recent changes adding frozen
berries and removing alcopops.
Each month’s inflation figure
shows how much these prices
have risen since the same date
last year.

You can calculate inflation in
various ways, but the main
“headline” measure is the Consumer Prices This effect was compounded in the UK in
Index (CPI). The CPI rate was 6.7% in the February by a shortage of vegetables, which
year to September, unchanged from August. took food inflation to a 45-year high. Alcohol
Food prices saw their first monthly fall in prices in restaurants and pubs also rose.
two years in September, but fuel prices rose
sharply. How does raising interest rates help to
tackle inflation?
Tesco boss Ken Murphy has said he expected The Bank of England has a target to keep
the pace of rising food prices to keep dropping inflation at 2%, but the current rate remains
as wholesale costs come down.
well above that. The traditional response to
rising inflation is to put up interest rates.
What is ‘core inflation’?
“Core inflation” excludes the price of energy, This makes borrowing more expensive, and
food, alcohol and tobacco.This measure means some people with mortgages see their
was 6.1% in September, marginally down monthly payments go up. Some saving rates
from 6.2% in August. The Bank of England also increase.
considers this number, as well as CPI, when
deciding whether to change interest rates. When people have less money to spend, they
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