How high will inflation go?

We expect inflation in the UK to rise to around 11% this year and to start to slow next year. We expect it to be close to 2% in around two years.

This page was last updated on 17 June 2022

Prices have risen rapidly in the UK over the last year. The speed of that change in the price level is called the rate of inflation

The rate of inflation is forecast to keep rising this year. But we expect it to slow down next year, and be close to 2% in around two years. 

That’s both because the main causes of the current high rate of inflation are not likely to last, and because we have raised interest rates several times over the past few months.

Even though the rate of inflation will slow down, the prices of some things may stay at a high level compared with the past.

Why is the rate of inflation in the UK so high now?

There is more than one reason why the rate of inflation is currently so high.

It started to rise in 2021, in large part due to increased spending on goods during the Covid crisis. 

As economies around the world, including in the UK, opened up after Covid restrictions eased, some businesses struggled to meet this extra demand because of difficulties in getting the materials used in their production. 

Russia’s invasion of Ukraine led to sharp increases in the price of energy, which many people have already felt. The war in Ukraine has also caused an increase in the price of many agricultural commodities, such as grain, which are needed to produce food.

There is also increasing pressure on prices from developments at home. These include:  

  • there are more job vacancies than there are people to fill them, which means employers are having to offer higher wages to attract job applicants
  • businesses are charging more for their products

All of these things pushed prices (and so the rate of inflation) up.

That’s why we’ve raised our interest rate from 0.1% to 1.25%.

What does high inflation mean for me?

High inflation means an increase in the cost of living. You will be able to buy less of some things with the same amount of money than you did before. 

But how much costs change will vary. The cost of some things will go up more than others. 

What will make a difference is how much your overall cost of living changes compared to changes in your income. If prices go up but your income stays the same as it was a year ago, you’ll notice it won’t go as far as it did then.

What is the Bank of England doing about high inflation?

It’s our job to make sure inflation returns to our 2% target. To do this we have increased our interest rate from 0.1% to 1.25% since December 2021.

Higher interest rates make borrowing more expensive and they encourage saving.  Both of those things reduce how much people spend overall. This helps to push inflation down.

But higher interest rates don’t work straight away. They take time to take full effect. So when we use them, we always look at what will happen in the economy over the next few years, not just what’s going on now.

We will take the actions necessary to bring inflation down to 2%.

How high will interest rates go?

That all depends on what happens in the economy and what we think will happen to the rate of inflation over the next few years.

So we can’t say now exactly how high they will go. But they are not likely to reach the very high levels that some people experienced in the past.

We review how the economy is doing and whether a change in interest rates is needed eight times a year (roughly every six weeks).

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