Business

What is inflation and what is the current rate? – Sun

INFLATION has surged to its highest level in a decade and is more than double the Bank of England’s 2% target according to the latest data from the Office for National Statistics (ONS).

It spiked to 5.1% in November, up from 4.2% in October, 3.1% in September and 3.2% in August.

first

But what really is inflationary? And how does it affect prices and the economy? Here’s what you need to know.

What is inflation? And what does that mean?

Inflation is a measure of how much the prices of goods, such as food or television, and services, such as haircuts or train tickets, have changed over time.

Inflation rate is published monthly by Office for National Statistics (ONS)and this measures the average change in prices over the past year.

For example, the latest publication looked at the price of the year through November 2021 against the price of the year through November 2020.

It reported that inflation rates rose sharply due to higher prices of energy, fuel and clothing.

So if an item of clothing cost £10 a year ago and inflation was at 5.1%, the price of that item would now be £10.51 because it has increased by 5.1%.

How is inflation measured?

Inflation is measured by the ONS, which collects about 180,000 prices of about 700 goods and services used across the country.

These prices are updated monthly with officials visiting the same retailer each time to ensure consistency.

Then, more prominently weighted prices are offered for products that people buy more often, like fuel instead of postage stamps, for example.

There are many different measures of inflation, all of which track slightly different baskets of goods. The key metric known as the Consumer Price Index (CPI), state benefits and state pensions also increased.

There is also a Consumer Price Index that includes a measure of the cost of housing (CPIH), as well as a measure of the Retail Price Index (RPI), which is used to calculate the annual gain of the railway and student loan interest rate Among other things.

What is the UK’s current inflation rate?

The latest available figures in the CPI inflation gauge rose to 5.1% in November 2021.

Prices were artificially restrained last year due to lockdowns, rising fuel prices, persistently high demand in the used car market and problems, according to Laura Suter, a personal finance expert at AJ Bell. Supply issues have combined to create a strong bull run this fall, according to personal finance expert Laura Suter at AJ Bell.

Inflation plummets because of the coronavirus pandemic but is now rebounding as the country reopens and the economy gets on track.

What impact does inflation have on prices and the economy?

Inflation matters because it affects the value of wages, savings, and more. Thus, the Bank of England has an inflation target rate of 2%.

This target is set by the government that believes a small amount of inflation at a steady rate is good, since it boosts economic output by encouraging spending, which in turn means that businesses can afford create job opportunities.

It can also make goods more attractive to foreign buyers as it can make their currency more valuable, relative to other countries.

On the contrary, if inflation is too high or up and down a lot, it is difficult for businesses to set appropriate prices and people can plan to spend.

It can also mean that the cost of essential goods and services can suddenly outpace the purchasing power of people’s wages.

At the other end of the scale, if inflation is too low, or negative, then some people may stop spending because they expect prices to fall further.

However, low inflation is Good news for savers because the interest paid on saving is more than the cost of goods increases which means your spending power is further and further away.

For example, currently, the top easy-to-access current account is 0.71%, according to Moneyfacts, well below inflation at 5.1%.

The Bank of England also uses inflation as a guide when it is setting its base rate. The The prime rate is currently at a record low of 0.1%..

It was reduced from 0.25% to 0.1% in March 2020 to help control the impact of the coronavirus on the economy.

Banks then use this prime rate to set interest rates on everything from personal loans to loans. Mortgage.

A low base rate means that bank interest rates are also likely to be low, which benefits borrowers.

Variable rate mortgages and trackers follow the prime rate and can rise or fall at any time – so you might as well pay less if inflation falls.

But low inflation can mean banks also lower interest rates on savings, so you’ll make less money.

Low inflation can also mean your debts become more expensive, as the amount you owe remains the same, but it may be harder for you to pay off your debt or an item, such as a house or car, can depreciate from its original value.

See our guide to Is low inflation good or bad? for more information.

What is deflation?

Deflation – or negative inflation – is when the inflation rate falls below zero.

This can happen when the supply of a good is higher than the general demand. It can also be triggered by lower production costs or a lack of money in circulation.

The UK was last in deflationary territory in 2015, and although some experts speculate we could see negative inflation due to the pressure of the coronavirus on the economy, the increase in inflation latest makes this less likely.

This means lower prices for consumers, which on the surface is a good thing.

But the Bank of England points out that when prices fall, people often don’t buy because they expect costs to fall further.

And when people stop buying, less money goes to businesses and the economy, and those businesses in turn can cut wages or lose jobs.

How can I protect my finances against rising inflation?

The best way to beat price increases when inflation is high is to check your finances and see where you can cut costs.

You can Save hundreds of pounds by changing your supermarket shopping habits and avoid these mistakes.

Use Cashback sites can save you thousands of pounds in the long term.

For more tutorials, we’ve put together Martin Lewis’ eight money saving tips that could save you £9,243.

This is a mammoth 50 ways to save money including the best apps.

Venezuelans sell hair and jewelry to flee country suffering from 80,000% inflation as Maduro warns US ‘this will be another Vietnam’


We pay for your stories! Do you have a story for The Sun Online news group? Email us at the address give advice@ the-sun.co.uk or call 0207 782 4368. We pay for video too. Click here arrive upload your


https://www.thesun.co.uk/money/2394425/uk-inflation-rate-causes-rise/ What is inflation and what is the current rate? – Sun

Bobby Allyn

USTimeToday is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@ustimetoday.com. The content will be deleted within 24 hours.

Related Articles

Back to top button