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The inflation rate in the UK has risen by 3.8% in the year up to August, aligning with the rate observed in July. This rate continues to surpass the Bank of England’s 2% target, prompting the bank to adjust interest rates in an attempt to stabilize inflation. Since August 2024, the Bank has implemented five interest rate cuts to manage inflation.
Inflation signifies the gradual increase in the prices of goods and services over time. This is exemplified by tracking the price changes of various everyday items, including food and fuel, by the Office for National Statistics (ONS). The ONS assembles a “basket of goods” that is regularly updated to mirror current shopping trends, with recent additions such as virtual reality headsets and yoga mats.
The most recent figure for the Consumer Prices Index (CPI) indicates an inflation rate of 3.8% in the year leading up to August 2025, consistent with the prior year to July. Although these figures are the highest recorded since January 2024, when the rate was 4%, they remain significantly below the peak of 11.1% in October 2022. These variations in inflation are influenced by factors such as oil and gas demands post-Covid pandemic and increased food prices.
CORE CPI measures, excluding food or energy costs due to their volatility, provide insights into longer-term inflation trends. The 12-month figure for core CPI in August stood at 3.6%, slightly down from the 3.8% recorded in July. While inflation rates have declined from previous highs, prices are still rising, especially in the food and non-alcoholic beverages category, which saw a 5.1% increase in the year up to August. This sustained rise in food prices attributes to supermarkets adjusting prices to accommodate higher minimum wage and National Insurance Contributions.
The Bank of England’s decision to reduce interest rates to 4% aims to stimulate spending and encourage businesses to invest and create job opportunities amidst high inflation levels. This strategy reflects a careful balance between curbing inflation and sustaining economic growth. The Bank’s future interest rate adjustments will be
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