Money hacks Cushion yourself from the impact of inflation

Inflation measures how much prices rise over time. It is measured officially by the Office for National Statistics (ONS).

- Emma Lunn

Understand what it is

For its main measure, the ONS tracks the prices of about 700 everyday goods and services in arepresentative “basket”. The total cost of this basket forms the consumer prices index (CPI).

The headline rate, reported each month, is the percentage change in the CPI, compared witha year earlier. Previously, inflation was measured using the retail prices index (RPI), which tends to be higher. RPlis still used for certain things, suchas setting regulated train fares.

The most recent CPI inflation rate for October 2025 is 3.6%. This means, on average, something that cost £100 this time last year will cost £103.60 now.

Inflation is down slightly from the September rate of 3.8%, but that doesn’t mean prices have stopped rising. It only means they are not rising as quickly as before.

Inflation is important - it means the same money will buy you less each year. It also has animpact on interest rates because the Bank of Englandis tasked with keeping the rate stable, and as close to 2% as possible. When it is too high, the bank usually raises interest rates to make borrowing more expensive and saving more attractive, the aim being to reduce spending and cool price rises.

When inflation is falling, the Bank may reduce interest rates.

This has an impact on the cost of mortgages and the rates available on your savings.

Find your personal rate

Everyone has different shopping habits. And most people don’t make big purchases every year, such asa car ora pricey holiday (which feature in the CPI basket).

The ONS has a “personal inflation rate” calculator to help you see how quickly the cost of your own spending is rising, based on what you actually buy (it’s online at ons.gov.uk/visualisations/dvci1833/calculator/index.html).