When will inflation start to come down?

We expect inflation to start to come down next year. It’s our job to get inflation back down to 2%, and that's what we're going to do.

This page was last updated on 04 August 2022

We understand how difficult the cost of living squeeze is for many people. Inflation hits the least well off the hardest.

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

In June, prices had risen by 9.4% compared to a year ago. That is well above our 2% target. 

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?

Higher energy prices are one of the main reasons why the rate of inflation is so high.. Russia’s invasion of Ukraine has led to more large increases in the price of gas. Since May, the price of gas has doubled. We think those price rises will push inflation even higher over the next few months, to around 13%.

Higher prices for the goods we buy from abroad have also played a big role. 

During the Covid pandemic people started to buy more goods. But the people selling these have had problems getting enough of them to sell to customers. That led to higher prices – particularly for goods imported from abroad. 

There is also pressure on prices from developments in the UK.

Businesses are charging more for their products because of the higher costs they face. There are more job vacancies than there are people to fill them, as fewer people are seeking work following the pandemic. That means that employers are having to offer higher wages to attract job applicants. And prices for many services have gone up.

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?

The UK Parliament task us with keeping the rate of inflation at 2%. Putting up interest rates is main thing we, as the UK’s central bank, can do to bring the rate of inflation down. 

We’ve been raising Bank Rate since December. Most recently, we put it up on Thursday 4 August to 1.75%.

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 whatever actions are necessary to bring inflation down to 2%.

When will inflation start to fall?

We expect inflation to start to fall next year. 

That’s because it’s unlikely that the prices of energy and imported goods will continue to rise as rapidly as they have done recently. And we expect that some of the production difficulties businesses are facing will ease. Less demand for goods and services in the UK should also push down prices.

We have a target of 2% for inflation. We expect inflation to be close to that target in around two years.

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