UK inflation has risen at its fastest pace in 40 years.
The increase has been attributed to the unprecedented rise in energy bills, as well as cost of fuel, putting pressure on household finances.
Here’s all you need to know about inflation.
What is inflation?
Inflation is a word used by economists to describe the sustained rise in prices of goods and services within a country over a set period of time.
Inflation rates vary all the time in response to external factors such as the price of oil, which has risen of late as lockdown restrictions ease under the government’s roadmap.
The ONS releases regular updates on the UK’s inflation rate, which has been brought into focus since the Covid pandemic hit, for people to assess living costs and make changes.
As inflation rates increase so does the cost of living, meaning the value of currency decreases.
Why is inflation going up?
Latest ONS figures show the UK inflation rate increased by 9% in the 12 months to April 2022 - up from 7% in March 2022.
There has been an increase in prices to clothes and footwear, furniture, household costs, among other everyday items over the past few months, say the ONS.
Why is UK inflation rates on the up?
Chancellor Rishi Sunak said: “Countries around the world are dealing with rising inflation.
“Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.
“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action.”
Shadow chancellor Rachel Reeves demanded a full emergency budget with Labour set to force a vote on the issue later on Wednesday, saying: “Today’s inflation data will add to the worries families already face as prices soar and pay packets are crunched.”
Liberal Democrat Leader Sir Ed Davey added: “Families and pensioners on the brink need saving from soaring inflation but this Conservative government is nowhere to be found.
“We need an emergency VAT cut now to slash prices at the till and fuel pump today. The warning lights are all flashing red and Boris Johnson hasn’t a second to lose.”
What happens when inflation rises?
The inflation rate is forever changing.
When the inflation rate goes up, goods and services cost more and the money in consumers’ pockets doesn’t stretch as far, resulting in an increase in the cost of living generally.
This is seen as a good thing, to a degree, by some economists who think a moderate rate of inflation encourages people to spend what they have today rather than see its value decrease.
The theory is based on people’s temptation to buy today outweighing the thought of seeing your money diminish in value over time as inflation rises and the cost of a cup of coffee increases.
It all contributes towards a healthy economy where people are spending money to create more demand for goods and services, and in-turn maintaining supply chains and employment.
The Bank of England expects UK inflation to be in excess of 5%, above its 2% target, before the rate gradually levels out over 2022 and 2023.