Inflation refers to the increase in the price of goods and services over time. It erodes the purchasing power of money, impacting the cost of living for individuals and households.
The Office for National Statistics (ONS) uses the Consumer Prices Index (CPI) to measure inflation in the UK. This index monitors the prices of a basket of goods and services.
The UK's inflation rate stands at 8.7% for the year up to April, down from 10.1% in March. However, it remains significantly higher than the target rate of 2%
The rising cost of food and energy, driven by increased demand and supply chain disruptions, has been a key driver of inflation in the UK.
Global events, such as the war in Ukraine and commodity price fluctuations, have put additional pressure on prices in the UK, affecting the cost of living.
As prices rise, the purchasing power of individuals and households decreases. Wages are struggling to keep up with inflation, leading to financial challenges for many.
The Bank of England has raised interest rates 12 times in a row, reaching 4.5%, in an effort to curb inflation. This increases borrowing costs and reduces consumer spending.
Wage increases have not kept up with rising prices, resulting in a decline in real wages. This has led to strikes and demands for higher salaries to match the cost of living.
High inflation rates and reduced consumer spending can impact businesses, leading to fewer job opportunities and potential staff cuts.
Inflation is expected to decrease, but it will take time. The Bank of England predicts a drop to 5% by the end of 2023. The government aims to halve inflation by the same time.
Other countries, including those in the Eurozone and the US, are also grappling with high inflation rates due to similar factors such as energy costs and supply chain disruptions.
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