Inflation measures how quickly the prices of goods and services rise over time — eroding the purchasing power of money. The UK's primary inflation measure is the Consumer Prices Index (CPI), published monthly by the Office for National Statistics (ONS). Understanding UK inflation history helps explain mortgage rate decisions, wage negotiations, pension increases, and the overall health of the British economy.
This article provides the complete annual UK CPI data from 1990 to 2025, contextualises every major inflation event, and explains how inflation affects your shopping, rent, savings, and mortgage.
Key UK Inflation Statistics at a Glance
Annual UK CPI Inflation Rate: 1990 to 2025
The table below shows the average annual UK CPI rate for each year. CPI data before 1997 is reconstructed by the ONS using the historical CPI methodology. Source: ONS Consumer Price Inflation.
Note: CPI (Consumer Prices Index) was formally adopted as the UK's main inflation measure in 2003. Earlier figures are ONS back-calculated estimates. RPI (Retail Prices Index) was the main measure before 2003 and is typically 0.5-1.5pp higher than CPI.
| Year | CPI Annual Rate (%) | Context |
|---|---|---|
| 1990 | 9.5% | Post-1980s boom, high interest rates |
| 1991 | 5.9% | Recession begins, rates cut |
| 1992 | 3.7% | Black Wednesday — pound exits ERM |
| 1993 | 1.6% | Recovery, low inflation |
| 1994 | 2.4% | Steady growth |
| 1995 | 2.6% | Stable economic conditions |
| 1996 | 2.5% | Near target levels |
| 1997 | 1.8% | Bank of England gains independence |
| 1998 | 1.6% | Low inflation era begins |
| 1999 | 1.3% | Asia financial crisis dampens prices |
| 2000 | 0.8% | Dot-com boom, low commodity prices |
| 2001 | 1.2% | 9/11 impact, economic slowdown |
| 2002 | 1.3% | Euro notes/coins launched in Europe |
| 2003 | 1.4% | CPI formally adopted as main measure |
| 2004 | 1.3% | Housing boom continues |
| 2005 | 2.1% | Oil price rises |
| 2006 | 2.3% | Stable growth |
| 2007 | 2.3% | Sub-prime crisis emerges in US |
| 2008 | 3.6% | Global financial crisis; oil spikes to $147/barrel |
| 2009 | 2.2% | Recession; QE introduced by Bank of England |
| 2010 | 3.3% | VAT rise to 20%; energy price rises |
| 2011 | 4.5% | Commodity prices surge; VAT effect |
| 2012 | 2.8% | Eurozone crisis; austerity |
| 2013 | 2.6% | Slow recovery |
| 2014 | 1.5% | Oil price collapse begins |
| 2015 | 0.0% | Near-deflation; oil price -50% |
| 2016 | 0.7% | Brexit vote; pound falls |
| 2017 | 2.7% | Post-Brexit import price rises |
| 2018 | 2.5% | Wage growth improving |
| 2019 | 1.8% | Brexit uncertainty dampens demand |
| 2020 | 0.9% | Covid-19 pandemic; demand collapse |
| 2021 | 2.6% | Post-lockdown demand surge; supply shortages |
| 2022 | 9.1% | Energy crisis; Ukraine war; CPI peaked at 11.1% in October |
| 2023 | 7.3% | Persistent food and services inflation |
| 2024 | 2.5% | Disinflation; base rate held then cut |
| 2025 (forecast) | ~2.5-3.0% | Services inflation sticky; energy cap effect |
Source: ONS Consumer Price Inflation time series (CZWT, L55O). Annual averages. 2025 figure is OBR/Bank of England forecast as of February 2026.
Key Inflation Events in UK History
The Bank of England's 2% Inflation Target
The Bank of England's Monetary Policy Committee (MPC) meets eight times per year to set the base interest rate. Its primary mandate is to maintain CPI inflation at 2% — set by the UK government and measured by the ONS.
The MPC's primary tool is the base interest rate. Raising rates makes borrowing more expensive, reducing consumer and business spending, which slows price rises. Cutting rates stimulates spending and economic activity, supporting demand. The Bank also uses Quantitative Easing (buying government bonds) to inject money into the economy in times of crisis.
How Inflation Affects Everyday Life in Britain
Grocery Shopping
Food inflation peaked at 19.2% in March 2023. A typical £100 weekly shop in 2021 cost approximately £119 by 2023. Budget supermarkets (Aldi, Lidl) saw record market share gains as households switched to save money.
Rent and Housing
Private rents rose 9% year-on-year in 2023 (ONS data), faster than wages in many regions. Landlords passed on higher mortgage costs after base rate rises, squeezing renters in a market with low supply.
Mortgages
The base rate rise from 0.1% to 5.25% caused average 2-year fixed mortgage rates to jump from below 2% to over 6% by late 2023. A £200,000 repayment mortgage saw monthly payments rise by £500-£700 for those remortgaging.
Savings and Pensions
Higher base rates finally rewarded savers: NS&I Premium Bonds, easy-access and fixed savings rates all rose to levels not seen since 2008. State pension increases under the Triple Lock were 10.1% in April 2023, protecting pensioners from inflation erosion.
Energy Bills
The Ofgem energy price cap rose from £1,042/year (October 2021) to £3,549/year (October 2022) before the Energy Price Guarantee capped bills at £2,500 until April 2023. Household energy costs were the single largest driver of the 2022 inflation surge.
Wages vs Inflation
Real wages (wage growth minus inflation) fell sharply in 2022-23. By October 2022, workers saw a real pay cut of around 3% even as nominal wages grew 6%. Real wage growth returned to positive territory in late 2023 as inflation fell faster than wage growth slowed.
Real vs Nominal Wages: The Purchasing Power Story
Inflation makes it essential to distinguish between nominal wages (what you are paid in cash) and real wages (what you can actually buy). A 5% pay rise when inflation is 10% is a 5% real pay cut.
| Period | Nominal Wage Growth | CPI Inflation | Real Wage Change |
|---|---|---|---|
| 2021 | +5.8% | +2.6% | +3.2% (real rise) |
| 2022 | +6.0% | +9.1% | -3.1% (real cut) |
| 2023 | +7.8% | +7.3% | +0.5% (near flat) |
| 2024 | +5.5% | +2.5% | +3.0% (real rise) |
By 2024, UK workers experienced meaningful real wage growth for the first time since 2021, as nominal wage growth significantly exceeded CPI inflation. However, the cumulative loss in purchasing power from 2022-23 meant that average real wages in early 2024 were still below their 2021 peak.
How Inflation Is Measured: CPI vs RPI
The ONS publishes several inflation measures. The two most important for UK residents are:
| Measure | What It Includes | Used For | Typically Higher? |
|---|---|---|---|
| CPI | Broad basket of goods; excludes mortgage costs, council tax | Bank of England target, benefit uprating, state pension Triple Lock | No (lower) |
| CPIH | CPI plus owner-occupiers' housing costs (OOH) | ONS headline preferred measure since 2017 | Slightly higher |
| RPI | Includes mortgage interest payments, council tax | Index-linked gilts, some train fare increases, legacy pension schemes | Yes (0.5-1.5pp higher) |
Calculate the Effect of Inflation on Your Money
Use our free UK inflation calculator to see how much purchasing power you have lost or gained.
Open Inflation Calculator →UK Inflation Outlook for 2025
As of early 2026, the outlook for UK inflation in 2025 suggests:
- Headline CPI is expected to average 2.5-3.0% for 2025 before gradually returning toward the 2% target
- Services inflation remains elevated at around 5%, driven by strong wage growth feeding into labour-intensive sectors like hospitality, healthcare, and education
- Energy prices have stabilised after the 2022-23 crisis, with the Ofgem price cap falling significantly from its peak. Future energy prices depend on global gas markets and the pace of renewable energy deployment
- Base rate cuts: The Bank of England is expected to continue cutting rates gradually through 2025, provided inflation behaves as forecast. Markets anticipated rates reaching around 3.5-4% by end-2025
- Key upside risks: Renewed energy price spikes, geopolitical disruption to trade, stronger-than-expected consumer demand
- Key downside risks: Weaker-than-expected economic growth, sharp fall in commodity prices, demand weakness from stretched household budgets
For the latest official UK inflation data, visit the ONS at ons.gov.uk or the Bank of England's inflation page at bankofengland.co.uk.
Frequently Asked Questions
What is the current UK inflation rate in 2025?
UK CPI was 2.5% in December 2024, down from a peak of 11.1% in October 2022. For the most current figure, check the ONS monthly CPI release at ons.gov.uk. The Bank of England's target is 2%.
What was the highest UK inflation rate in modern history?
In the modern CPI era, the highest UK CPI was 11.1% in October 2022, driven by the energy price crisis, post-pandemic demand, supply chain issues, and Russia's invasion of Ukraine. In the RPI era, UK inflation exceeded 20% in the mid-1970s.
What is the Bank of England's inflation target?
The Bank of England targets 2% CPI inflation. If CPI moves more than 1 percentage point from the target, the Governor must write to the Chancellor explaining why. The Monetary Policy Committee adjusts the base interest rate to steer inflation toward 2%.
What is the difference between CPI and RPI?
CPI excludes mortgage interest payments and council tax, uses geometric averaging. RPI includes housing costs and uses arithmetic averaging, making it typically 0.5-1.5 percentage points higher. CPI is the Bank of England's official target; RPI is used for index-linked gilts and some rail fares.
How does inflation affect my savings in the UK?
Inflation erodes the real value of savings. If your savings account pays 3% but inflation is 4%, you are losing 1% purchasing power annually. During 2022-23 when inflation exceeded 10%, cash savers faced severe real losses unless their accounts paid inflation-matching rates.
How did the 2022 energy crisis cause UK inflation to spike?
Russia's invasion of Ukraine in February 2022 disrupted global gas supplies, causing UK gas and electricity prices to soar. The Ofgem energy price cap rose from around £1,042/year (October 2021) to a peak of £3,549/year (October 2022). Energy costs alone contributed approximately 4 percentage points to the October 2022 CPI peak of 11.1%.
What causes inflation to rise in the UK?
UK inflation rises due to: excess demand (too much money chasing goods), cost-push factors (rising energy, commodity or wage costs), currency depreciation (making imports costlier), or supply disruptions. The 2021-23 surge involved all four simultaneously.