In recent years, the UK has had a relatively high rate of inflation which has exasperated the already difficult cost of living crisis.
However, a recent announcement by the Office for National Statistics revealed that the rate of inflation in the UK had dropped to 6.7%, the lowest figure in 18 months.
While this fall paints a more optimistic picture, abrdn financial expert Shona Lowe warned “We’re not out of the woods yet”.
Annual inflation slowed slightly in August 2023:
▪️ Consumer Prices Index including owner occupiers’ housing costs rose by 6.3% in the 12 months to August, down from 6.4% in July
▪️ Consumer Prices Index (CPI) rose by 6.7%, down from 6.8% in July
— Office for National Statistics (ONS) (@ONS) September 20, 2023
How is inflation measured in the UK?
According to the Bank of England, inflation is the measure of how much the prices of goods and services have gone up over time.
It says: “Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.”
It added that if the inflation rate is 3%, the prices are on average 3% higher than the previous year
In the UK, inflation is measured by the Office for National Statistics which collects the prices for 700 items.
It then uses this ‘shopping basket’ to work out the Consumer Price Index (CPI) which is the country’s official measure of inflation.