We know that inflation is still perhaps the most pressing issue facing economies around the world. This is particularly the case for the United Kingdom and the United States. According to the most recent figures released by the Office for National Statistics (ONS), the UK inflation rate peaked at 3.8% for the year ending this past August. This number is consistent with the rate we saw in July. By contrast, the inflation rate in the United States increased to 2.9% in August compared to 2.7% in July. This increase underscores the continued economic pain as both nations face the challenge of exploding consumer inflation.
The ONS tracks the prices of hundreds of everyday items, including food and fuel, to provide accurate measures of inflation. The Consumer Prices Index (CPI) is our main measure of inflation. Published every month, it tracks real-time shifts in consumer spending by constantly refreshing its “basket of goods” to reflect the most current shopping trends. In 2025 we added things such as virtual reality headsets and yoga mats to this basket. This shift is a dramatic illustration of the way consumer choices can influence the calculation of inflation.
Food price inflation in the UK has skyrocketed for five consecutive months. By August, it reached an unprecedented rate of 5.1%. The Bank of England closely monitors this data, considering alternative measures such as core inflation, currently at 3.6% for the 12 months to August, to inform its monetary policy decisions. The Bank’s inflation target of 2% is a goal that it has not achieved in recent years.
In the US as well, the central bank’s inflation target is set equally low at 2%. With inflation rising, pressure has grown for a more stable economic environment. In September, inflation rates for all Euro-using countries was at 2.2%, an increase from 2% in August. This increase is reflective of a larger trend of increasing prices globally across advanced economies.
The exceptional inflation surge we’ve seen here in the UK and across the pond in the US is largely the result of extraordinary recent events. Then after the Covid-19 pandemic eased, demand for oil and gas bounced back, driving up energy prices. This double whammy was made worse when Russia invaded Ukraine, sending energy prices soaring around the world. By October 2022, that inflation rate had soared to a shocking 11.1% in the UK. That was the greatest amount recorded in 40 years.
The Bank of England responded to these challenges in a radical way. As inflation continued to trend high, they raised interest rates to 5.25%, the highest level in 16 years. Andrew Bailey, Governor of the Bank of England, emphasized the need for careful monetary policy adjustments during this turbulent period.
“We are not out of the woods yet,” – Andrew Bailey
Bailey reiterated that any changes to interest rates “will need to be made gradually and carefully” as the bank navigates through an unstable economic landscape. It appears the Bank’s approach is based on a balance of stabilizing long-run inflation, while encouraging sustainable economic growth.
As consumers still struggle to make ends meet amidst record inflation, knowing what’s causing inflation in the first place is more critical than ever before. The ONS’s work to deliver timely, accurate data is critical to shedding light on these trends, so that policymakers can be informed in their decisions.