Yahoo News When inflation and prices will start coming down, according to the Bank of England
The Bank of England has released a new report on the rising cost of living
It comes with inflation at a 40-year high - at more than 10%
It is driving the cost-of-living crisis and getting a grip of this will be the key priority of the new government
Read the full article below to find out how long it is expected to take for inflation to fall to the Bank's target rate of 2%
Amid the political turmoil in Westminster, one issue has remained a constant for households in the rest of the country: the cost of living crisis.
The key task of Liz Truss’s replacement as prime minister - should they last more than 45 days in the job - will be to calm the markets and bring inflation under control as millions of families face hardship this winter and beyond.
As the drama surrounding Truss’s job played out on Wednesday, an inflation report from the Bank of England probably received less attention than it would have done in “normal” times - but it was no less significant.
The report estimated how long inflation will remain at its current rate, which is unsustainable for most people. Here, Yahoo News UK sets out its key points.
What is the current rate of inflation?
Inflation has reached 10.1%: that is to say prices are 10.1% higher than they were a year ago.
Driven largely by massive energy price rises, the figure is a 40-year high, and remains well above the Bank’s target of 2%.
When will inflation and prices start coming down?
In its report, the Bank said it will be next year before inflation begins to fall - and that the situation will get even worse before it gets better.
It warned: “We expect the rate of inflation to peak at 11% in October and then remain above 10% for a few months before starting to come down.”
Watch: Liz Truss’ 44 days in office in 44 seconds
To try and control inflation, the Bank has raised interest rates, essentially to discourage borrowing and reduce spending.
However, it said it could take two years before this takes effect, and for inflation to fall to the 2% target.
What is the impact of high inflation?
As the Bank says: “High inflation means an increase in the cost of living. The amount you have to spend won’t go as far as it used to.”
It means if you have the same income as you did a year ago, you are worse off. And people on lower incomes are hit hardest.
Read more: Liz Truss entitled to £115,000 a year despite only serving 45 days as PM
This has stark consequences. On Friday, the Financial Conduct Authority (FCA) released figures showing 7.8 million people were struggling to keep up with their bills, an increase of around 2.5 million people since 2020.
On Thursday, Which? research suggested millions of households are skipping meals or finding it hard to put healthy food on the table as they struggle with the cost-of-living crisis.
Among the 9% who said they are finding it “very difficult” to get by, half (50%) said their household was skipping meals, as did 26% of those who are finding the current situation “quite difficult”.
