This article is from the source 'bbc' and was first published or seen on . The next check for changes will be

You can find the current article at its original source at https://www.bbc.co.uk/news/business-12196322#7

The article has changed 40 times. There is an RSS feed of changes available.

Version 38 Version 39
UK inflation rate: How quickly are prices rising? UK inflation rate: How quickly are prices rising?
(14 days later)
Prices in the UK rose by 3.5% in the 12 months to April, with the inflation rate fuelled by higher household energy and water bills. Prices in the UK rose by 3.4% in the 12 months to May, fuelled by higher food prices, including chocolate.
Inflation remains above the Bank of England's target which is 2%. It moves interest rates up and down to try to keep inflation at that level. It means inflation remains above the Bank of England's 2% target.
The Bank expects inflation to rise again this year after several months of gradual falls. It has cut interest rates four times since last August to the current 4.25%. The Bank moves interest rates up and down to try to keep inflation at that level, and has cut interest rates four times since August 2024.
What is inflation?What is inflation?
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 virtual "basket of goods" is regularly updated to reflect shopping trends, with virtual reality headsets and yoga mats added in 2025, and local newspaper adverts removed.This virtual "basket of goods" is regularly updated to reflect shopping trends, with virtual reality headsets and yoga mats added in 2025, and local newspaper adverts removed.
The ONS monitors price changes over the previous 12 months to calculate inflation.The ONS monitors price changes over the previous 12 months to calculate inflation.
The main inflation measure is called the Consumer Prices Index (CPI), external, and the latest figure is published every month.The main inflation measure is called the Consumer Prices Index (CPI), external, and the latest figure is published every month.
CPI was 3.5% in the year to April 2025, up from 2.6% in the 12 months to March. CPI was 3.4% in the year to May 2025, the same rate as in the 12 months to April.
It was a bigger rise than analysts had expected, which the ONS said was driven by "significant increases in household bills", such as gas and electricity.
The Bank also considers other measures such as "core inflation" when deciding whether and how to change rates.The Bank also considers other measures such as "core inflation" when deciding whether and how to change rates.
Core CPI doesn't include food or energy prices because they tend to be very volatile, so can be a better indication of longer term trends. It doesn't include food or energy prices because they tend to be very volatile, so can be a better indication of longer term trends.
Core CPI was 3.8% in April, up from 3.4% in March. Core CPI was 3.5% in the year to May, down from 3.8% in April.
Why are prices still rising?Why are prices still rising?
Inflation has fallen significantly since hitting 11.1% in October 2022, which was the highest rate for 40 years.Inflation has fallen significantly since hitting 11.1% in October 2022, which was the highest rate for 40 years.
However, that doesn't mean prices are falling - just that they are rising less quickly.However, that doesn't mean prices are falling - just that they are rising less quickly.
Inflation soared in 2022 because oil and gas were in greater demand after the Covid pandemic, and energy prices surged again when Russia invaded Ukraine.Inflation soared in 2022 because oil and gas were in greater demand after the Covid pandemic, and energy prices surged again when Russia invaded Ukraine.
It then remained well above the 2% target partly because of higher food prices.It then remained well above the 2% target partly because of higher food prices.
Why does putting up interest rates help to lower inflation?Why does putting up interest rates help to lower inflation?
When inflation was well above its 2% target, the Bank of England increased interest rates to 5.25%, a 16-year high.When inflation was well above its 2% target, the Bank of England increased interest rates to 5.25%, a 16-year high.
The idea is that if you make borrowing more expensive, people have less money to spend. People may also be encouraged to save more.The idea is that if you make borrowing more expensive, people have less money to spend. People may also be encouraged 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.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.
What is happening to UK interest rates and will they go down again? What is happening to UK interest rates and when will they go down again?
The Bank of England cut rates in August and November 2024, and again in February and May 2025, taking rates to 4.25%.The Bank of England cut rates in August and November 2024, and again in February and May 2025, taking rates to 4.25%.
Bank of England governor Andrew Bailey said the May decision was a result of inflation dropping back, and indicated that further "gradual and careful" cuts could follow. It held rates in June, but Bank of England governor Andrew Bailey indicated that further "gradual and careful" cuts could follow - perhaps as early as August.
However he warned that the introduction of US tariffs has shown "how unpredictable the global economy can be". The Bank said it expected the tariffs to slow the UK economy and lead to lower inflation than expected. However Mr Bailey also warned that the introduction of US tariffs has shown "how unpredictable the global economy can be".
The Bank previously said it expected inflation to spike at 3.7% between July and September 2025 before dropping back towards the end of 2027. The Bank now expects the tariffs to slow the UK economy and lead to lower inflation than expected.
It had previously said it thought inflation would spike at 3.7% between July and September 2025 before dropping back towards the end of 2027.
When will interest rates go down again?When will interest rates go down again?
How Trump's tariffs might affect you and your money
Are wages keeping up with inflation?Are wages keeping up with inflation?
The latest official figures, external show that regular pay in Great Britain grew by more than inflation between January and March. The latest official figures, external show that regular pay in Great Britain grew by more than inflation between February and April.
Average annual growth in pay (excluding bonuses) during the three-month period was 5.6%. Average annual growth in pay (excluding bonuses) during the three-month period was 5.2%.
After taking inflation into account, wages grew by 2.6% between January and March. After taking inflation into account, wages grew by 2.1% between February and April.
Private sector earnings increased by slightly more than public sector pay. As is usually the case, private sector earnings increased by slightly more than public sector pay.
Five tips when asking for a pay riseFive tips when asking for a pay rise
How to get a job: Six expert tips for finding workHow to get a job: Six expert tips for finding work
Who are the millions of Britons not working?Who are the millions of Britons not working?
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?
The US and EU countries have also been trying to limit price increases.The US and EU countries have also been trying to limit price increases.
The inflation rate for countries using the euro was 2.2% in April 2025, the same as in March and down slightly from 2.3% in February.The inflation rate for countries using the euro was 2.2% in April 2025, the same as in March and down slightly from 2.3% in February.
In June 2024, the European Central Bank (ECB) cut its main interest rate from an all-time high of 4% to 3.75%, the first fall in five years.In June 2024, the European Central Bank (ECB) cut its main interest rate from an all-time high of 4% to 3.75%, the first fall in five years.
After eight rate cuts in a year, its key rate stands at 2%. In June 2025, after several cuts, its key rate stood at 2%.
Inflation in the US fell to 2.4% in March, which was down from 2.8% the previous month but still above the US central bank's 2% target. Inflation in the US fell to 2.4% in May, which was up from 2.3% the previous month. It remains above the US central bank's 2% target.
After a string of cuts in the latter part of 2024, the US central bank again chose to hold rates at its May meeting, citing the uncertainty generated by the US tariffs. After a string of cuts in the latter part of 2024, the US central bank again chose to hold rates at its June 2025 meeting, the fourth hold in a row.
That leaves its key interest rate unchanged in a range of 4.25% to 4.5%.That leaves its key interest rate unchanged in a range of 4.25% to 4.5%.
The Federal Reserve has repeatedly come under attack from President Trump, who wants to see further cuts. The Federal Reserve has repeatedly come under attack from President Trump, who wants to see further interest rate cuts.