UK Inflation Rate and Graphs

Current UK Inflation Rate

  • CPI inflation rate: 1.3% (headline rate)
  • CPIH – 1.3% in the year to Aug 2014
  •  (page updated 18 November, 2014)




CPIH is a new experimental index from the ONS. It is based on CPI, plus it includes housing costs, such as mortgage interest payments. Owner occupiers cost (OOH) account for 12% of the CPIH weighting. Mortgage interest payments are the biggest part of OOH. Mortgage interest payments average 10% of household expenditure.


Inflation excluding the effect of taxes

The ONS publish a measure CPI-CT – this is a measure of inflation at constant taxes, i.e. the effect of an increase in excise duty is taken away from the index. This gives a better guide to underlying inflationary pressure.


CPI-CT was lower than CPI during 2010 because tax increases, such as VAT, increased the headline CPI rate. The fall in CPI during 2011 was partly due to tax increases no longer affecting the price index.



CPI-CT is a measure of inflation at constant taxes. It excludes the effect of changes in VAT or excise duties. For example in 2010, RPI inflation was higher than CPI-CT because of the increase in the rate of VAT.


RPI is still published by the ONS, but it is no longer designated as a national statistic.

UK CPI RPI Inflation

RPI includes more items, such as housing and mortgage interest rate costs. It is calculated in a different way to CPIH. See: Definitions of CPI, RPI, RPIX

The ONS also publish a new measure RPIJ - which involves a new method of calculating RPI


Producer inflation


The producer price index measures the price of manufactured goods as they leave the factory gate.

There is also an input price index which measures cost of raw materials. These are both a guide to future inflationary pressures.

See more at: Input and producer prices

Gap Between RPI and CPI


There is a debate about whether government spending commitments should be calculated through CPI or RPI. Currently benefits are linked to CPI; this means the increase in benefits is generally smaller than if we used the RPI method.


Inflation and Interest rates


The Bank of England are responsible for monetary policy. They target an inflation rate of CPI = 2% +/-1. They also take into account economic growth.

Usually, with an inflation rate above 2%, you would expect the Bank of England to increase base rates to reduce inflationary pressures. However, since early 2009, the Bank of England have cut base rates to 0.5%. This is because the Bank of England are worried about the depth of the recession. They have argued that the increase in inflation (e.g. during 2011) was due to temporary cost push factors, such as taxes, commodity prices and effects of devaluation. Therefore, they tolerated CPI inflation above target rather than risk a deeper recession.

Inflation v Unemployment


Unemployment and Inflation

Historical Inflation

UK inflation since 1918

UK inflation 1918-2011

Note the period of deflation in the 1920s / 30s

The highest periods of inflation were:

  • During the two world wars
  • 1970s inflation

inflation 1800

Inflation more volatile in the nineteenth century.

UK Money Supply

Notes and coins is known as a narrow money supply (old measure M0)



 M4 Money supply

M4 money supply is a measure of notes and coins in circulation, plus bank deposits. It is known as a broad money supply and is a guide to underlying economic activity and bank lending.


click to enlarge-  Source: Money databases at Bank of England | see also Money supply and inflation

Fall in M4 Lending – helps to explain why Bank of England didn’t increase interest rates during 2011 – despite high headline inflation.

Boom and Bust – Inflation in Late 1980s


Record economic growth of 5% a year in the late 1980s, led to a spike in inflation of 10% by 1990. Inflation only fell after higher interest rates and membership of the ERM caused a fall in domestic demand.


Inflation and Wage Growth

Inflation is a big factor in determining real wage growth


 Latest UK wages

EU Inflation

Further Reading on Inflation


5 Responses to UK Inflation Rate and Graphs

  1. Rob Slack November 21, 2012 at 12:12 pm #

    Including tuition fees gives a false impression. If they were not paid by students/parents they would be paid by taxpayers. The real issue is whether the introduction of fees increases quality and/or efficiency in education.

    The hike in fees will be offset by reduced taxes (at some time).

    • melvyn walker March 21, 2013 at 10:47 am #

      If only we had maintained the levels between 1983-89; i.e. keeping inflation at a similar level to GDP we wouldn’t be where we are now!
      Wether growth is sustainable or not, you can’t have infinite growth in a finite system, fact!


  1. Bank of England criticisms - Economics Blog - March 5, 2013

    […] Inflation […]

  2. Finding economic stats and data at ONS and Bank of England - Economics Blog - April 27, 2013

    […] Inflation […]

  3. UK economy in 2014 | Economics Help - January 9, 2014

    […] Inflation […]