Inflation Is Down – But Here's Why We Are Still Very Much In A Cost Of Living Crisis

Inflation has fallen, but the cost of living crisis continues.
Inflation has fallen, but the cost of living crisis continues. via Associated Press

The inflation rate may have fallen but there’s no doubt that we are still in a cost of living crisis.

The Office for National Statistics (ONS) confirmed on Wednesday that inflation is almost back to its 2% target rate, having dropped to 2.3%.

PM Rishi Sunak said this was a sign that “the plan is working and that the difficult decisions we have taken are paying off”.

However, most economists thought inflation would be closer to 2% for this month’s figures – meaning the Bank of England may not drop the central interest rate from its current 5.25% anytime soon.

Interest rates decide the cost of borrowing – and so until that falls, anyone with credit or a mortgage, will continue to face the squeeze.

The consumer price index has also risen at a shocking rate over the last few years because of the long, stubborn period of inflation.

That means food and energy prices are still 20% higher than they were in 2021.

A fall in inflation does not mean a decline in prices, but means the rate at which prices rise has slowed.

So it’s no surprise that a poll from the New Economics Foundation (NEF) think tank, found just 9% of Brits think the squeeze on household budgets is over – and 86% think it’s ongoing.

Speaking to BBC Newsnight, NEF chief executive Danny Sriskandarajah, said: “It’s great that the headline numbers around inflation are looking more positive, but what’s really worrying is that the cost of living is not getting better.”

He said: “I think it’s shameful that there are still millions of people are living in poverty.

“There are 5.5 mmillion people on universal credit – five out of six of them cannot afford basic essentials.

“If we claim to be a civilised society, why is our state not paying those people, all of us, a decent enough allowance for us to be able to live a decent life?”

He said: “There are lots of ways that if politicians wanted to, they could address the cost of living crisis.”