Economic indicators: UK inflation
Where's inflation heading now?
Last updated 24 May 2013
Inflation affects us all, one way or another. It lowers the value of money, and it's key to the cost of cash – otherwise known as the level of interest rates.
Britain's headline consumer price index (CPI) inflation is now rising at 2.4% a year, still above the Bank of England's 2% target. Meanwhile, the older-style RPI inflation – the retail price index, which includes housing costs – is running at 2.9% a year.
So is a higher cost of living turning into a long-term major problem for the UK, or are inflationary pressures now easing? Before inflation really sets in, there are always early warning signs. We've spotlighted several that have proved useful guides in the past.
You can read in detail what each indicator suggests for UK inflation – and for some, the bank rate too – using the links below.
• The rising oil price risk to Britain
• How rising food prices push up UK inflation
• China's inflation threat to the UK
• What manufacturing prices are saying about inflation
• The 'factory gate' danger to Britain's cost of living
• The Bank of England's biggest worry - higher wages
• The BRC Neilsen shop price index (SPI)
One final comment. If the UK's bank rate (what we all used to call 'base' rate) rises, mortgage rates won't be far behind. That could mean higher mortgage payments for millions. And to get an idea of just how low the UK bank rate currently is, look at this chart.
It shows the bank rate in blue, and RPI minus the bank rate in red going back to 1948. In other words, RPI is about as high as it's been compared with the Bank's core interest rate since 1980. For how long can this continue?