UK CPI inflation has returned to close to the Bank of England's 2% target. But the headline figure masks significant variation across different categories.
The Headline Numbers
CPI: 2.3%, marginally above target. CPIH (including housing costs): 3.1%. RPI: 4.2%, still used for student loan interest and some index-linked bonds.
What Is Still Rising
Services: 4.1% inflation reflecting domestic wage pressure. Services are labour-intensive and wages remain above the rate consistent with 2% inflation.
Rents: Private sector rents rising at approximately 8% per year in London, 6-7% nationally.
Food: 26% higher than before the 2021-23 crisis. The rate has slowed but the level has not reversed.
What Has Fallen
Energy prices below their peaks. Global goods prices eased as supply chains normalised. New car prices falling with EV availability increasing.
The Outlook
Bank of England central forecast: inflation around 2-2.5% through 2026. Main risks are wage growth feeding into services prices and any renewed energy shock.
