Inflation has been the center of economic debates since it spiked to heights not seen in decades in 2021 and 2022. This was the case even as the surge started to increase markedly in 2022. Later, booming post-COVID demand for oil and gas combined with geopolitical tensions, particularly after Russia’s invasion of Ukraine, pushed energy prices even higher. This article explores the story behind UK inflation rates since 2021. In addition, it benchmarks these trends against those in the United States and countries in the Eurozone.
In October of 2022, inflation across the pond in the UK soared to a crisis level of 11.1%. In real terms, this represented the greatest low in 40 years. The situation has since improved. By March 2025, inflation fell to 2.6%, a decline from 2.8% in February. Bank of England Governor Andrew Bailey attributed this decline to the positive effects of monetary policy adjustments and stabilizing market conditions.
The Office for National Statistics (ONS) goes to great lengths to monitor price changes. They monitor an enormous basket of traditional goods/services. Every edible item consumed, or fuel used. The ONS uses a virtual “basket of goods” that is updated frequently to keep pace with shifting shopping habits. This new methodology has the potential to better reflect how Americans spend their dollars and where inflationary pressures are being felt.
Behind the headlines, the UK’s inflation trends tell a fascinating story. At the same time, in euro-using countries, inflation continued to stabilize at 2.2% in April 2025, down from 2.3% in February. Secondly, picture this — it’s March 2025 and U.S. inflation has fallen to 2.4%. That was a drop from 2.8% a month prior, but still well above the central bank’s goal of 2%.
To combat this, they drastically raised interest rates to a 16-year high of 5.25% as inflation doubled and then tripled their target of 2%. In reaction to the panic, interest rates were lowered by a fraction of a percentage point over the ensuing months. These fell to 5% in August 2024, then to 4.75% in November, 4.5% on February 6, 2025, and finally to 4.25% on May 8, 2025.
The current volatility of inflation is quite remarkable when looking back over the past several decades. As recently as January 2016, inflation was at an almost nonexistent 0.3%. Yet, inflation rates quickly rose even more dramatically after that, peaking at historic highs in late 2022. After this inflation high, prices continued to drop, with a return to 1.7% inflation by September 2024.
European Central Bank (ECB) reactions to increasing inflation have resulted in perverse outcomes. In June 2024, the central bank lowered its key interest rate from a record high of 4% to 3.75%. Such changes are designed to help boost economic slumber while inflation levels swing drastically in every direction throughout Europe.
Beyond the math, these inflationary trends carry major implications for families. They shed light on the challenges that consumers and policymakers are still wrestling with today. Increasing costs have put a strain on at-home budgets, changing spending habits and putting a strain on economic prosperity. The adjustments made by central banks are critical in managing inflation and in fostering economic recovery post-pandemic.