How is inflation calculated? Everything you need to know about the measures after UK inflation hits 9%
Official figures released on Wednesday showed the cost of living crisis continuing to squeeze British residents with inflation of up to 9% – the highest in more than 40 years.
This increase is calculated over a 12-month period and is up from 7% in March.
But what does this mean and how are these numbers calculated?
In its simplest form, inflation is an increase in the cost of common goods and services that households spend money on.
As a simplified example, if a loaf of bread cost £1 12 months ago, it now costs £1.09.
In economics, prices are expected to rise over time, but any rapid increase in the speed of inflation can hit the public hard financially.
The main calculation of inflation is known as the Consumer Price Index, which measures the percentage change in the price of a series of goods and services.
These are weighted according to their perceived importance, with accommodation receiving the most weight in the algorithm and communication services such as broadband and mobile phone contracts receiving the least.
Prices are collected from a range of online and high street retailers, supermarkets and department stores where households shop in addition to government authorities when considering costs such as taxes, suppliers of energy and real estate agents.
What do rising inflation levels mean for ordinary people?
For some time now, rising wages have not been able to keep up with rising service costs, meaning budgets will continue to be stretched.
The Consumer Price Index is not the only indicator of the cost of living, rather it offers a means of calculating inflation which is then used to calculate the cost of living.
What can I do to fight inflation?
Households cannot do much because they are already feeling the effects of the rising cost of living. The Bank of England could seek to make borrowing more expensive to encourage the public to save money.