Inflation in the UK has fallen slightly after rising to its highest level in 40 years.
Inflation hit 10.1% in July, with the Bank of England predicting numbers could peak at 13%.
The drop has came after falling fueling prices in the UK, with food prices and energy costs still rising.
The cost of living crisis continues to put the squeeze on households and businesses.
Here’s everything you need to know about why inflation is so high and when it will come down.
What is the current UK inflation rate?
The current inflation rate in the UK is 9.9%.
Although it has fallen from the 10.1% in July, it is still close to the highest rate the UK has seen in 40 years.
The last time inflation was over 9% was in 1981, when it hit 9.1.
Even with the slight reduction, costs are still rapidly rising.
According to the Office for National Statistics (ONS), prices rose 0.5% in July.
In a statement, the ONS said: “Food and non-alcoholic beverages made the largest upward contribution to the monthly rates in August 2022, while falling prices for motor fuels resulted in a large offsetting downward contribution.”
Why is inflation so high?
The rate of inflation began to rise in 2021 after the Covid-19 pandemic.
As countries around the world began to open up again, businesses struggled to meet with the extra demand for goods and services.
With a gap in production, accessing materials was challenging and many businesses were left with shortages.
The February 2022 invasion of Ukraine by Russia only exacerbated the situation, by driving up the price of gas, oil and petrol.
Ukraine is also a key player in the world’s agricultural sector, being one of the largest grain producers.
The lack of grain supply has seen prices for food soar and also caused food shortages.
As a result of this, businesses have had to charge more for their products, which leaves households in the UK feeling the strain.
When will inflation come down?
The Bank of England has predicted that inflation will come down in 2023.
But, they will still be a long way off their target for 2%.
It’s predicted it will take two years to get rates back to that level.
What are the inflation predictions for 2022?
The Bank of England has predicted that inflation will keep rising in 2022, peaking at 13%.
The next few months will see households put under more pressure as the cost of living is set to continue to soar.
The new Prime Minister Liz Truss, who beat Rishi Sunak in the Tory Leadership Race announced her plan to freeze energy bills at £2,500 a year until 2024.
In August it was announced the energy price cap would rise 80% to £3,549 from October, with speculation it could peak at over £5,000 in 2023.
In her speech to Parliament on Wednesday 7 September, she explained the scheme.
Truss said: “This government is moving immediately to introduce a new energy price guarantee that will give people certainty on energy bills, it will curb inflation and boost growth.
“This will save a typical household £1,000 a year. It comes in addition to the £400 energy bills support scheme. This guarantee supersedes the Ofgem price cap and has been agreed with energy retailers.”