Why are UK prices rising more quickly? in World Economy News 12/05/2026 Prices in the UK rose by 3.3% in the year to March, up from the 3% recorded in January and February, and above the Bank of England’s 2% target. These were the first official inflation figures since the start of the US-Israel war with Iran, which has put up energy and fuel costs around the world. The Bank moves interest rates up and down to try to keep inflation on track. Six cuts since August 2024 had brought rates down to 3.75%, but the war is expected to delay any further falls, and the next move could be up. What is inflation? Inflation is the increase in the price of something over time. For example, if a bottle of milk costs £1 but is £1.05 a year later, then annual milk inflation is 5%. How is the UK’s inflation rate measured? The prices of hundreds of everyday items, including food and fuel, are tracked by the Office for National Statistics (ONS). This virtual “basket of goods” is regularly updated to reflect shopping trends, with alcohol-free beer, dashboard cameras, and pet grooming equipment among items added in 2026, while premium bottled lager, some categories of wine and sheets of wrapping paper were removed. The ONS uses price changes in the basket of goods over the previous 12 months to calculate inflation. The main inflation measure is called the Consumer Prices Index (CPI), and the latest figure is published every month. What is happening to UK inflation? Although the March CPI figure of 3.3% remains above the Bank of England’s target, it is well below the 11.1% figure reached in October 2022. That was the highest rate for 40 years. The increase in March – which meant prices are going up more quickly than previously – was widely expected. It was largely due to increased fuel prices, the ONS said, coupled with higher air fares and food costs. Precisely because food or energy prices can be very volatile, the Bank of England also considers other measures, such as “core inflation”, when deciding whether and how to change rates. Core CPI was 3.1% in the 12 months to March, down from 3.2% in February. UK inflation had been expected to be at or around the target level of 2% over the next five years, according to the official forecasts published alongside Chancellor Rachel Reeves’ Spring Statement on 3 March. But those predictions were made before the Iran war. In April, the Bank of England warned that UK inflation could go as high as 6% in the worst-case scenario. What other factors push inflation up? Although inflation has fallen significantly since the October 2022 high, that doesn’t mean prices are falling — just that they have been rising less quickly. Inflation soared in 2022 because oil and gas were in greater demand after the Covid pandemic, and energy prices surged again when Russia invaded Ukraine. It then remained well above the 2% target, partly because of higher food prices. Food price inflation has continued to be an issue. It rose from 3.3% to 3.7% in the year to March 2026, driven by increases in the cost of chocolate and confectionery, meat, fish, and soft drinks – possibly linked to the timing of Easter. However, it can take seven to 13 months for cost increases in the food supply chain to feed through to prices on supermarket shelves. The Food and Drink Federation, which represents manufacturers, warns food inflation could be as high as 10% by the end of 2026. Employees who face higher living costs are more likely to push for pay rises. F