Inflation tracker

PwC expert commentary

Today marks a decisive moment in the fight against inflation as it is the first time it has been confirmed that CPI inflation has returned to the Bank of England’s 2.0% target in almost three yea rs. This is the longest period that inflation has exceeded the 2% target since the early 2010s, when it took four years to return to target. However, during that period inflation only peaked at 5.2%, compared to a peak of 11.1% in October 2022.

Consumer prices have risen by 20% since inflation was last at target. In the three years prior to this inflation episode, prices had risen by just 5%. That means the cumulative increase in prices has been roughly four-times faster than in more normal times. The one saving grace for households is that nominal earnings have increased by 18% over the same period, preventing a sharper decline in living standards.

However, it is not ‘job done’ yet. If prices continue to rise at the same month-on-month rate as they did this month (0.3%), then headline inflation will be back over the 2% target next month (at 2.1%). This is because underlying momentum remains above levels that are consistent with the 2% target, particularly with regards to services inflation.

Jake Finney, Economist at PwC