What is inflation?
Inflation is the rate at which prices rise over time. If inflation is 3%, something that cost £100 a year ago now costs about £103. In the UK it is mainly measured by the Consumer Prices Index (CPI). The Bank of England aims to keep it at 2% a year.
The Office for National Statistics (ONS) tracks the prices of hundreds of everyday items, from bread to bus fares. It compares them with a year earlier to get the inflation rate. CPI inflation was 3.1% in August 2026, up from 2.9% in July, mainly because petrol and diesel prices jumped. The Bank of England's target is 2%. To bring inflation down it can raise interest rates, which makes borrowing dearer and cools spending. Inflation matters because wages, benefits and savings lose value if they rise more slowly than prices. A little inflation is normal in a healthy economy. Very high inflation, like the 11.1% peak in October 2022, squeezes household budgets hard. Falling prices, called deflation, can also be harmful because people delay spending.
The left often blames high inflation on corporate profits and energy shocks. It favours price caps, windfall taxes and pay rises that keep up with prices.
The right often blames high inflation on too much government spending and borrowing. It favours tight control of public spending and an independent central bank.
Britain is split. Now you decide.
In a full term you set the Budget and watch inflation respond to your spending, taxes and the shocks the world throws at you.
Play WeDecide freeCommon questions
What is the UK inflation target?
The government sets the Bank of England a target of 2% CPI inflation. If inflation misses it by more than one percentage point, the Governor must write a letter explaining why.
Is inflation good or bad?
Low, steady inflation is seen as healthy. High or unpredictable inflation hurts savers and people on fixed incomes.
Does inflation falling mean prices go down?
No. Falling inflation means prices are rising more slowly. Prices only fall if inflation goes below zero.