Inflation continues to rise

According to official figures released this morning, inflation has increased for the second month running.

Data from the Office for National Statistics (ONS) shows inflation rose to 2.6% in November, up from 2.3% in October.

The two consecutive rises follow inflation falling to 1.7% in September – the first time it had dropped below the Bank of England’s 2% target in three years. It was over 11% in the autumn of 2022.

The rise in November’s figures has been blamed on higher clothing, petrol, and diesel costs compared with last year. Prices for recreation and cultural activities also increased.

Today’s figures come ahead of the Bank of England’s base rate announcement tomorrow (19 December). 

With inflation starting to tick up again, it’s unlikely that the bank’s Monetary Policy Committee (MPC) will cut interest rates.

However, the Bank of England doesn’t appear concerned about October and November’s increases, saying: “it remains within the normal range.”

Economists have predicted inflation will hit 3% in January, where it should hold steady.

What is inflation and how is it measured?

Inflation is a measure of price rises for goods and services over time.

The Office for National Statistics measures inflation by tracking the prices of hundreds of everyday items in an imaginary shopping basket.

Each month’s inflation figure shows how much the price of this basket of goods has risen in the space of a year.

What does inflation mean for prices in shops?

Prices are still rising when inflation is lower, which means they’re going up at a slightly lower rate. For example, if a pint of milk cost £1 last year and inflation is 2.5%, it would now cost £1.02.

Are inflation and interest rates linked?

When inflation rates rise too much, the Bank of England increases the base rate to help bring it back under control. This base rate influences the interest rates banks and lenders offer you. When inflation is higher, borrowing becomes more expensive. This means people have less money to spend elsewhere. When people spend less, demand and prices are brought down, lowering inflation.