Consumer price index

Over the five years through 2025-26, the CPI increased at a compound annual rate of 5.0% to reach 139.2 points. Price inflation is a measure of the annual percentage change in the cost of living, represented by the CPI the UK government's preferred measure, covering services, housing, utilities, food and transportation.

The CPI inflated by a comparatively slow 0.6% year-on-year in 2020-21, suppressed by demand destruction from worker furloughing, the collapse in global oil prices and government stimulus schemes that lowered prices for consumers. In 2021-22, annual growth in the CPI accelerated by 4% as the economy reopened and supply constraints caused prices to surge. In 2022-23, inflationary pressures intensified sharply, the UK 12-month CPI rate hit a high point of 11.1% in October 2022, driven primarily by energy price volatility and supply chain disruption stemming from the Russia-Ukraine conflict.

In response, the BoE's Monetary Policy Committee (MPC) systematically raised the Bank Rate from its pandemic low of 0.1%, reaching a peak of 5.25% in August 2023. Higher borrowing costs discouraged consumer spending and business investment, exerting downward pressure on prices across housing, retail and services. In 2023-24, CPI growth moderated as this tightening cycle took hold. Inflation continued to cool in 2024-25. As price pressures subsided, the BoE shifted stance, cutting the Bank Rate from 5.25% to 5.0% in August 2024, to 4.75% in November 2024 and to 4.5% in February 2025.

In 2025-26, energy and water price increases at the start of the period, alongside national insurance and minimum wage hikes, drove CPI higher, with the annual rate reaching 3.8% in September 2025. However, inflation has since trended lower. The BoE continued easing policy throughout this period, reducing the Bank Rate to 3.75% by December 2025, before holding at that level at its February 2026 meeting, with the MPC noting it now expects inflation to return to the 2% target by spring 2026.