THE UK’S rate of inflation has risen in July.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measure hit 3.8% in the 12 months to July.
The Office for National Statistics has published July’s inflation figures[/caption]
This is compared to a reading of 3.6% in the 12 months to June, which marked the steepest increased in inflation since January 2024.
Inflation is a measure of the value of goods and services over a given period.
Rising inflation means prices are going up faster than they were the month before, pushing up grocery and household bills.
The CPI figure measured 3.4% in May, down from 3.5% the month before.
The school summer holidays were said to have seen airfares rise considerably, with airlines typically bumping up prices in July amid stronger demand from families.
Analysts for Pantheon Macroeconomics forecast that airfares have surged by 17.1% between June and July.
Rail costs and package holidays are also set to have jumped amid the spike in summer travel.
The Bank of England is predicting that inflation will rise further this year and should peak at 4% in September, before easing over the next two years.
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
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.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we’re earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.