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

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.”