What Is Inflation?
Inflation is the rate at which the general level of prices for goods and services rises, leading to a fall in purchasing power. It is a key economic indicator that reflects the decrease in the value of money, meaning that each unit of currency buys fewer goods and services over time.
Measuring Inflation
In the UK, inflation is primarily measured by the Consumer Price Index (CPI), which is published monthly by the Office for National Statistics (ONS). The CPI tracks the weighted average of price changes across a basket of consumer goods and services, such as transportation, food, medical care, and entertainment. These changes are indicative of the shifts in the cost of living.
Additionally, the Retail Price Index (RPI) serves as another critical measure. Unlike the CPI, the RPI includes housing costs such as mortgage interest payments and council tax, offering a broader scope of the inflationary landscape.
Why It Matters
Inflation is critical for several reasons:
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Purchasing Power: It reduces the purchasing power of money, meaning consumers can buy less with the same amount of money over time.
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Wages and Salaries: If wages do not increase with inflation, purchasing power and the standard of living decline.
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Savings: Inflation can erode the value of savings, especially if the interest rates on savings accounts are lower than the rate of inflation.
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Economic Policies: Central banks, such as the Bank of England, use interest rates and other monetary tools to control inflation to ensure economic stability.
Understanding inflation is crucial for both personal financial planning and for policymakers. It influences decisions on spending, saving, and investing, and it's an essential factor in the formulation of economic policies aimed at fostering sustainable economic growth.
What is the Current UK Inflation Rate?
The current UK inflation rate is 2.30%, according to the latest Office for National Statistics (ONS) data.
How Inflation Works In The UK
Inflation in the UK is the measure of the rate at which the average price level of goods and services in an economy increases over a period of time. It is an indicator of the economic health of the country, influencing consumer purchasing power, monetary policy, and financial decisions.
The Key Drivers Of Inflation In The UK
Inflation in the UK is influenced by demand-pull factors, such as increased consumer spending and government expenditure, and cost-push factors, including rising commodity prices, wages, and import costs due to fluctuations in the pound's value.
Monetary policies set by the Bank of England also play a crucial role, with changes in interest rates affecting economic activity and inflation expectations.
Additionally, global economic conditions, including market trends and geopolitical events, can impact inflation through effects on trade, supply chains, and global market stability. Together, these elements interact to shape the overall inflationary trends in the UK, reflecting both domestic economic policies and external economic pressures.
The Bank of England's Role
The Bank of England plays a crucial role in managing inflation through its monetary policy. The primary goal of the Bank is to keep inflation at a target rate of 2%, as set by the government.
To do this, the Bank uses tools such as setting interest rates and quantitative easing.
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Interest Rates: By raising interest rates, borrowing becomes more expensive, and spending and investment may decrease, which can help reduce inflation. Conversely, lowering interest rates can stimulate spending and investment but might increase inflation.
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Quantitative Easing: This involves the Bank creating new money electronically to buy government bonds. This increases the money supply and lowers interest rates, boosting spending and investment to help meet inflation targets.
Inflation Glossary
Select a term to reveal its definition.
The rate at which the general level of prices for goods and services is rising, subsequently eroding purchasing power.
UK Inflation Data
(1935-2024)
Year | Inflation Rate (%) | YoY Difference |
|---|---|---|
1935 | 0.63 | - |
1936 | 0.63 | 0 |
1937 | 3.75 | 3.12 |
1938 | 1.2 | -2.55 |
1939 | 2.98 | 1.78 |
1940 | 16.76 | 13.78 |
1941 | 10.89 | -5.87 |
1942 | 7.14 | -3.75 |
1943 | 3.33 | -3.81 |
1944 | 2.82 | -0.51 |
1945 | 2.75 | -0.07 |
1946 | 3.05 | 0.3 |
1947 | 7.04 | 3.99 |
1948 | 7.61 | 0.57 |
1949 | 2.89 | -4.72 |
1950 | 3.13 | 0.24 |
1951 | 9.09 | 5.96 |
1952 | 9.17 | 0.08 |
1953 | 3.05 | -6.12 |
1954 | 1.98 | -1.07 |
1955 | 4.36 | 2.38 |
1956 | 5.1 | 0.74 |
1957 | 3.53 | -1.57 |
1958 | 3.2 | -0.33 |
1959 | 0.41 | -2.79 |
1960 | 1.03 | 0.62 |
1961 | 3.44 | 0 |
1962 | 4.19 | 0.75 |
1963 | 2.01 | -2.18 |
1964 | 3.2 | 1.19 |
1965 | 4.77 | 1.57 |
1966 | 3.91 | -0.86 |
1967 | 2.48 | -1.43 |
1968 | 4.7 | 2.22 |
1969 | 5.45 | 0.75 |
1970 | 6.37 | 0.92 |
1971 | 9.44 | 3.07 |
1972 | 7.07 | -2.37 |
1973 | 9.2 | 2.13 |
1974 | 16.04 | 6.84 |
1975 | 24.21 | 8.17 |
1976 | 16.56 | -7.65 |
1977 | 15.84 | -0.72 |
1978 | 8.26 | -7.58 |
1979 | 13.42 | 5.16 |
1980 | 17.97 | 4.55 |
1981 | 11.88 | -6.09 |
1982 | 8.6 | -3.28 |
1983 | 4.61 | -3.99 |
1984 | 4.96 | 0.35 |
1985 | 6.07 | 1.11 |
1986 | 3.43 | -2.64 |
1987 | 4.15 | 0.72 |
1988 | 4.16 | 0.01 |
1989 | 5.76 | 1.6 |
1990 | 8.06 | 2.3 |
1991 | 7.46 | -0.6 |
1992 | 4.59 | -2.87 |
1993 | 2.56 | -2.03 |
1994 | 2.22 | -0.34 |
1995 | 2.7 | 0.48 |
1996 | 2.85 | 0.15 |
1997 | 2.2 | -0.65 |
1998 | 1.82 | -0.38 |
1999 | 1.75 | -0.07 |
2000 | 1.18 | -0.57 |
2001 | 1.53 | 0.35 |
2002 | 1.52 | -0.01 |
2003 | 1.38 | -0.14 |
2004 | 1.39 | 0.01 |
2005 | 2.09 | 0.7 |
2006 | 2.46 | 0.37 |
2007 | 2.39 | -0.07 |
2008 | 3.52 | 1.13 |
2009 | 1.96 | -1.56 |
2010 | 2.49 | 0.53 |
2011 | 3.86 | 1.37 |
2012 | 2.57 | -1.29 |
2013 | 2.29 | -0.28 |
2014 | 1.45 | -0.84 |
2015 | 0.37 | -1.08 |
2016 | 1.01 | 0.64 |
2017 | 2.56 | 1.55 |
2018 | 2.29 | -0.27 |
2019 | 1.74 | -0.55 |
2020 | 0.99 | -0.75 |
2021 | 2.52 | 1.53 |
2022 | 7.92 | 5.4 |
2023 | 6.8 | -1.12 |
2024 | 4 | -2.8 |
About This Data
The inflation data presented in this calculator is compiled from multiple sources to provide a comprehensive view of historical inflation rates in the United Kingdom. Our primary sources include the Office for National Statistics (ONS), the Bank of England, and The World Bank, along with additional data from various other official and unofficial entities.
While we strive to offer accurate and relevant information, users should be aware that this data is an interpretation and may not fully represent the exact figures for any given year. Economic indicators like inflation rates are subject to revisions and can vary based on the method of calculation, changes in market conditions, and updates to data collection practices over time.
Consequently, the information provided should not be taken as an absolute measure of inflation. It is meant to offer a historical perspective and aid in understanding general trends rather than precise values. Users are advised to consult the latest releases and reports from the mentioned sources for the most up-to-date and detailed insights regarding inflation trends in the United Kingdom.
This calculator is not intended for use as the sole basis for any financial decisions. We recommend using it as a tool for educational and illustrative purposes only.