The rate of price increase has decreased slightly, but it is still high despite expectations that it will fall further.
The skyrocketing cost of items such as bread, cereal and chocolate means that 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 £1.05 after a year, the annual milk inflation is 5%.
How is the UK inflation rate measured?
To come up with the inflation figure, the Office for National Statistics (ONS) tracks the prices of hundreds of everyday items in an imaginary “basket of goods”.
The cart is constantly updated to keep up with shopping trends, with the latest changes adding frozen berries and removing Alcopops.
The inflation figure for each month shows how much these prices have risen since the same date last year.
You can calculate inflation in different ways, but the main “main” measure is the Consumer Price Index (CPI).
Why are prices rising so quickly?
Higher food and energy bills have helped drive up inflation.
Prices of alcoholic beverages in restaurants and bars have also gone up.
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Are wages keeping pace with inflation?
Many people’s salaries do not keep pace with rising prices.
But when you factor in inflation, ordinary wages actually fell 1.3% in the three months through April, compared to the same period a year earlier.
How does raising interest rates help tackle inflation?
The Bank of England aims to keep inflation at 2%, but the current rate is much higher than that.
This makes borrowing more expensive, and can mean that some people with mortgages see their monthly payments go up. Some savings rates also increase.
When people have less money to spend, they buy fewer things, which reduces demand for goods and slows the rise in prices.
Companies also borrow less, which makes them less likely to create jobs, and they may lay off employees.
The next interest rate announcement is June 22nd.
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 fall?
Lower inflation does not mean lower prices. It just means that they don’t get up that fast.
When the bank announced its rate decision in May, it said headline inflation would “fall down sharply from April,” while warning that food inflation was likely to ease more slowly than previously expected.
It expects inflation to fall to 5% by the end of 2023, instead of the 4% it had expected.
What is the rate of inflation in Europe and the United States?
Other countries are also experiencing cost-of-living pressures.
Many of the reasons are the same – increasing energy costs, shortages of goods and materials, and the fallout from Covid.
The European Central Bank also increased interest rates in an effort to reduce inflation in the Eurozone. Its record rate is now 3.5%, its highest rate in 22 years.
However, it left interest rates unchanged in June, saying it wanted time to assess the impact of the rate increases made so far.