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What is inflation? published at 06:20 BST Image source, EPA Inflation is the increase in the price of something over time. For example, if a bottle of milk costs £1 but is £1.10 a year later, then annual milk inflation is 10%. If it had risen to £1.05 instead, then the inflation rate would be lower, at 5%.
That would still have been an increase, but a smaller one. When we say the inflation rate has fallen, that often means prices are still rising, just not as quickly. The price of hundreds of everyday items and services, including food and fuel, are tracked by the Office for National Statistics (ONS) to produce the Consumer Prices Index (CPI), with the latest figure published monthly.
This "basket of goods" - intended as a representative sample of consumer spending - is regularly updated to reflect shopping trends , with alcohol-free beer, dashboard cameras, and pet grooming equipment among items added in 2026, while premium bottled lager, some categories of wine and sheets of wrapping paper were removed. Benefits, pensions and interest rate decisions are all affected by inflation. For example, the Bank of England has a CPI target of 2%, and will often raise interest rates if the number gets too high.
It's worth noting that CPI does not include costs associated with buying, renting or maintaining a home, or the costs faced by manufacturers - those measures of inflation are released separately.
Source: BBC
