Inflation is the rate at which the value of a currency is falling and, consequently, the general level of prices for goods and services is rising. Inflation has been mostly driven by the rising cost of energy.

As things began to return to normal after Covid, demand for oil and gas increased. In addition, because less was available from Russia due to the conflict in Ukraine, prices were further pushed upward.

The war has also decreased the amount of grain that is accessible, increasing the price of food worldwide.

Food inflation in the UK reached a 45-year high in February as a result of this effect and a lack of lettuce and other vegetables.

Price rise (%)

Olive oil-49.2

Sugar-42.1

Low fat milk-38.8

Whole milk-37.9

Other food products (inc yeast, baking powder, stock)-37.5

Sauces, condiments, salt, herbs and spices-33.7

Cheese-33.6

Eggs-32.0

Frozen vegetables (except potatoes)-30.2

Liver-29.1

Many people's pay increases aren't keeping up with the rate of inflation.

According to official statistics, the average weekly wage in the UK in January was £589, up £1 over the previous month.

The average wage increased by around £3 per month in 2022.

When inflation is taken into account, however, the average wage actually decreased by 2.4% in the three months leading up to January when compared to the same time the year prior.

Many workers have been on strike over pay because unions believe that wages should reflect the cost of living.

According to the government, significant pay increases could lead inflation to grow even more since firms Although the Bank of England aims to keep inflation at 2%, the actual rate is still more than five times that.

Interest rates have historically increased in reaction to growing inflation.

Due to the increased cost of borrowing, certain borrowers who have mortgages may experience an increase in their monthly payments. Additionally, some saving rates rise.

People buy fewer things when they have less money to spend, which decreases the demand for commodities and slows price increases.

Businesses may also reduce employees and create fewer employment as a result of borrowing less money.

The Bank raised interest rates in March for the eleventh time in a row, bringing the benchmark rate to 4.25%.