Inflation is the rate at which prices rise and fall over a period of time. For example, if prices rise by 2.5% over the last year, annual inflation will be deemed to be 2.5%. Typically inflation is a weighted measure of a basket of goods and services with some having a larger influence over the total inflation rate than others. In the UK, inflation is tracked by the UK Office of National Statistics (ONS).
Tracking inflation data is very important as it’s a key indicator of economic health and price stability. This is why many global central banks such as the BoE have an inflation target within their mandate. Learn more about inflation.