There is no escaping inflation: whether it’s energy, food, transport or entertainment you are paying for, prices are going up – and at pace.
Once again this week’s headlines have been dominated by the latest figures – on Wednesday we learned that inflation had reached a 40-year high of 9%. Plus, there have been warnings of worse to come. But what does it all mean? We asked readers what questions they had about inflation and its impact, and have tackled them below.
First, a bit of background.
The rise in the cost of living is captured in the monthly inflation rates reported by the Office for National Statistics. There are several different rates recorded by the economists: the consumer prices index (CPI), retail prices index (RPI), and CPIH (CPI including owner occupiers’ housing costs). It is CPI that hit 9% last month. CPIH was 7.8%, while RPI hit 11.1%.
The rates are different because of the goods that are included in the price tables, and also because of the way the figures are calculated. RPI tends to be the highest. It is set to be scrapped in 2030 but is currently still used to set the student loan interest rate and annual increases in train fares.
Q Would 0% inflation be good?
Hilary Osborne: inflation is the rate at which prices are going up – it does not tell you how high prices are historically, just how much higher or lower they are than last year. So if this time next year inflation is 0%, that means prices will still be higher than in the same period in 2021.
That said, no one targets getting inflation to 0% or even below. Inflation of 2% is generally considered good – this is the rate that the Bank of England and other central banks target. This rate is high enough to encourage people not to sit on all of their
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