Is the UK Inflation Rate Easing?

The Cost-of-Living Crisis has been on everyone’s mind during 2022, affecting millions across the country. Whilst there are signs of prices easing, is there still a long way to go yet?

The cost-of-living crisis originated in 2021, however has been greatly influenced by many factors. These include the easing of COVID-19 restrictions, as well as the war in Ukraine increasing demand for items like grain. These and many other factors have resulted in 2022 having a 40-year high inflation rate, with the annual Consumer Price Index at 9%, meaning that prices for essential goods have risen by an average of 9% throughout the year. For example, a loaf of bread that may have cost £1 will now cost £1.09. This can be dangerous if inflation rates increase faster than living wages, which has happened for many people.

This is substantially higher than 2021’s CPI, which previously sat at an above-average 2.6%. For context, 2020’s annual CPI was 0.9%, 2019’s annual CPI was 1.8%, and 2017’s annual CPI was 2.5%. The Bank of England states a target annual inflation rate of 2%.

October saw record-breaking inflation rates, peaking at 11.1% for the month. This rate has since fallen slightly to 10.7% in November and 10.5% in December. Following this trend, one can estimate that the beginning months of 2023 will bring a drop in inflation rates and will most likely fall below 10%, easing the crisis slightly. It will also fall as the UK leaves the cold winter months, as there will be less demand for heating.

However, this is still substantially higher than the proposed 2% target. The cost-of-living crisis is unfortunately not going away anytime soon, especially considering the fact that many living wages are not being increased at the same rate as the cost of goods. The National Institute of Economic and Social Research has stated that “inflation will remain well above 2% for the whole of 2023.” Because of these arguments, many people feel unable to pay bills and purchase essential items, and it seems like there is still a long way to go with record-high rates until stability.

Sources:

CPI data from Office for National Statistics
Quote from National Institute of Economic and Social Research
Image from Pixabay