However, the current inflation rate remains above the Bank of England’s targeted 2%, leaving uncertainty about potential interest rate cuts at the upcoming June meeting.
Understanding inflation:
Inflation refers to the gradual increase in the price of goods and services over time. For instance, if a bottle of milk costs £1 initially but rises to £1.05 after a year, the annual inflation rate for milk would be 5%.
Measuring inflation in the UK:
The Office for National Statistics (ONS) tracks the prices of various everyday items, including food and fuel. This compilation forms a virtual “basket of goods,” which is regularly updated to reflect changing consumer trends. For instance, in 2024, vinyl records and air fryers were added to the basket, while hand sanitiser was removed.
To calculate inflation, the ONS monitors price fluctuations over the preceding 12 months. The primary measure of inflation is the Consumer Prices Index (CPI), external version.
In April, CPI experienced a decline mainly due to decreases in gas and electricity prices resulting from a reduction in the energy price cap.