What is inflation? Here's current rate in the UK, how it is calculated and how food prices have been impacted

INFLATION has reached a 40 year high in the UK.

Wednesday, 18th May 2022, 5:15 pm

The Office for National Statistics (ONS) said Consumer Prices Index inflation rose to 9 per cent in the year to April, up from an already high 7 per cent in March.

It was the fastest measured rate since records began in 1989, and the ONS estimates it was the highest since 1982.

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Inflation has reached a 40 year high in the UK. (Photo by Tolga Akmen / AFP) (Photo by TOLGA AKMEN/AFP via Getty Images)

A large portion of the rise was due to the price cap on energy bills, which was hiked by 54 per cent for the average household at the start of April.

But what actually is inflation?

Here’s all you need to know:

What is inflation?

The Bank of England describes inflation as: ‘The term we use to describe the increase in prices over time. How quickly those prices go up is called the rate of inflation.’

For example a £1 coffee would now cost £1.09 under the current rate of inflation.

The lower the rate of inflation the better, as a healthy economy needs ‘have a low and stable rate of inflation’.

How is it calculated?

The Bank of England says: ‘We know the rate of inflation because every month the Office for National Statistics checks the prices of a whole range of items in a ‘basket’ of goods and services.

‘They record the cost of over 700 things that people regularly buy. The basket includes everyday things like a loaf of bread and a bus ticket. It also includes much larger ones, like a car and a holiday.

‘The price of that basket tells us the overall price level. This is known as the Consumer Prices Index or CPI.

‘To calculate the rate of inflation, they compare the cost of the basket – the level of CPI – with what it was a year ago. The change in the price level over the year is the rate of inflation.’

How have food prices been impacted?

Overall food prices rose 6.8 per cent, the figures show, with meats, oils and some animal products especially hit.

The rise across meat categories was clear: lamb was the worst hit, up 14.2 per cent, followed by poultry (10.4 per cent) and beef (9.8 per cent) while pork got off with a lighter 4.9 per cent rise.

Butter prices rose 11.8 per cent and the price of oils and other fats soared 18.2 per cent over the last year after fears of a shortage sparked by the war in Ukraine.

The price of fresh milk also rose rapidly, up 13.2 per cent, while sugar and preserves rose 12.2 per cent.

Away from food, households were also hit by an 8.1 per cent extra price on their restaurant bills, while the price of takeaways and snacks rose 6.5 per cent.