The UK Economy - Inflation (CPI)

All business students need to have an understanding of the topic of inflation, which measures the rate of change in prices. In the UK, the main official measure of inflation is the CPI (consumer prices index) and the chart below illustrates how the rate of CPI inflation has changed in the last couple of decades.

Students ought to be aware that the Bank of England currently has a target rate of inflation of 2 per cent per year. Where is the CPI measure in relation to this target? Hover your mouse over the chart and you can see how CPI has generally been above the BoE target since May 2006. Indeed, at the time of writing (March 2011) CPI is exactly twice the target (at 4%) with the UK economy facing additional inflationary pressures from rising energy and commodity prices.

The chart below will update as soon as the monthly inflation statistics are published by the ONS, so bookmark this blog entry if you would like to point students to the latest data and trends in UK inflation.

Data from Timetric.

To view this graph, please install Adobe Flash Player.

Bank of England Target 2.0 from Timetric

UK inflation rate unexpectedly falls to 4% in March (April 2011)