Skip to content

Inflation: When is it Likely to Come Down?

In the past few months, inflation in the UK has risen to its highest rates in decades. With the majority of consumers worried about what this means for their bank accounts, it’s important to understand why inflation is so high at the moment and when it might drop.

Bank of England

© aslysun / Shutterstock

The story so far

Inflation was at 10.1% in September 2022, which is far above the Bank of England’s target rate of 2%. High inflation means that the spending power of money is falling at a faster rate than before.

This figure is based on an analysis of the cost of various different goods commonly bought and sold in the UK, including food, clothing, rent, and utilities. This is known as the consumer price index (CPI).

When the CPI grows, this indicates inflation. But it’s important to note that inflation doesn’t occur evenly across all goods; at the moment, the price of energy, food, and transport are the biggest factors driving up inflation in the UK.

Some level of inflation is normal, but when inflation is this high, it usually means that prices are rising faster than wages, which has a direct impact on people’s quality of life.

Before inflation drops, it may even rise further. According to the BCC economic forecast, the CPI rate is expected to reach 14% in the fourth quarter of 2022.

When is inflation due to fall?

Nobody knows exactly when inflation in the UK is going to fall, although predictions are indicating that inflation might fall from around the middle of 2023.

This drop is due to changes in those factors that are behind rising inflation, such as:

– Energy prices, which are not expected to rise as much in 2023 and may be capped by the government

– The price of imported goods, which is not expected to rise fast due to the easing of pressures on manufacturers this year

– A lower demand for goods, which is driven by rising inflation and cost of living, slows price rises further

A lot of the fiscal measures that the government introduce at times like this are designed to ease inflation, and the Bank of England also plays a role in tackling inflation by altering interest rates.

How do interest rates impact inflation?

Banks raise interest rates to bring down inflation. This is because higher interest rates make it more expensive to borrow money, which affects consumers’ spending behaviour. Instead of borrowing money, consumers are more likely to save their money, reducing the demand for goods and bringing inflation down.

The Bank of England raised the base rate of inflation by 0.75 points (3%) in November 2022, and further interest rate increases are expected next year. Already, since December 2021, the base rate has increased from 0.1%.

What does the future look like?

If predictions are correct, and the rate of inflation in the UK slows in 2023, this will be very positive for most people. It means that the cost of goods won’t rise so sharply, and workers might begin to see their wages grow faster than their expenses again.

It also means the Bank of England may, at some point, be able to lower interest rates, which is positive news for borrowers. Lower inflation figures usually have a positive effect on the financial markets, which have looked uncertain over the past few months.

Consumer borrowing

People looking for alternative means of borrowing money may be considering applying for a logbook loan secured on their vehicle to help them through these unprecedented times of economic uncertainty.

Logbook loans in the UK has increased by 61% since 2011, according to studies. While they didn’t have a great reputation ten years ago, today they have become a viable way of getting extra cash fast, which can sometimes make all the difference in an emergency situation.

The Financial Conduct Authority became involved in the overhaul of logbook loans over the years, with measures to protect borrowers, such as price caps on fees and interest being introduced in 2017. At the start of the agreement, lenders will give borrowers fair warning about the financial and other implications.

Warning: Late repayment can cause you serious money problems. For help go to