ONS figures show inflation rate ‘stuck’ at 8.7% as cost-of-living crisis continues - what is core inflation

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New ONS figures show that the rate of inflation has remained unchanged

The rate of inflation and price rises have remained unchanged despite economists predicting it would fall this month. Although a slight decrease to 8.4% was expected, The Office for National Statistics (ONS) figures show the consumer price index measure of inflation remains at 8.7%.

Additionally, there’s been an increase in core inflation which is now being watched by The Bank of England. Core inflation excludes the volatile fuel and food categories and has risen from 6.8% to 7.1%.

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The Bank of England has undertaken a programme of interest rate rises to bring inflation down to 2%. It is thought Wednesday’s figure will be watched closely by rate-setters ahead of the latest expected rise on Thursday.

Inflation began to increase in 2021 after the Covid lockdowns caused supply chain problems and the associated worker shortages meant demand for goods could not be met.

The war in Ukraine exacerbated the problem as many countries, particularly those in Europe, looked to find other energy sources and reduce their use of Russian gas, which pushed up the cost of energy and many other goods.

What is core inflation as ONS figures show inflation rate ‘stuck’ at 8.7%What is core inflation as ONS figures show inflation rate ‘stuck’ at 8.7%
What is core inflation as ONS figures show inflation rate ‘stuck’ at 8.7% | Pixabay

Core inflation

Core Inflation is a  measure of inflation which excludes certain volatile and seasonal prices. It is based on the consumer price index but excludes prices such as petrol and food. Core inflation will also exclude the impact of government excise duties.

Core inflation is used as a guide to long term inflation trends. However, if fuel price increases last for a while they can affect core inflation by raising price expectations.

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