What is your own inflation rate, and how is it determined?

In July, UK inflation increased slightly to 308 percent, in part due to skyrocketing airfares

Did your own rate of inflation increase more or less than the average for the country?

Inflation data, which shows how much costs have changed over the past year, is released monthly by the Office for National Statistics (ONS). Because everyone's shopping habits are a little different, your personal inflation rate may differ from the national inflation rate. However, how do you calculate it?

First, it's critical to comprehend how the Consumer Prices Index (CPI), the UK's official indicator of inflation, is determined. Every month, the ONS examines about 180,000 prices for nearly 750 common goods and services to determine how much prices have changed in order to calculate the CPI.

Eggs, flour, energy costs, gas prices, educational expenses, and more are all included in the shopping basket. Every year, the ONS makes additions and deletions to account for shifting consumer preferences. Nevertheless, price increases in your own lifestyle may not be accurately reflected in the basket.

For instance, earlier this year the CPI shopping basket was expanded to include vinyl records and air fryers, but you might prefer to eat oven chips while listening to Spotify. Although both of these are in the basket, the idea is that a significant price increase on an item you don't usually purchase could distort the results.

But more seriously, the basket also contains expenses that don't necessarily come up in people's daily lives, such as nursing home fees and airfare. At the same time, it excludes things like mortgage payments.

To give another example, one of the main causes of inflation in recent years has been energy prices. Retirees are typically more affected by these than young, active professionals. This is because older households tend to use the thermostat less frequently than younger ones because retired people spend more time at home and are more likely to feel the cold.

To gain a better understanding of how prices are changing for you, it might be worthwhile to compute your own inflation rate. We examine how to accomplish this and its significance.

How can I determine my own rate of inflation?

By looking over your bank statements and receipts and recording your monthly expenses, you can determine your personal inflation rate.

This will give you a rough idea of how much prices have increased or decreased if you compare this to your spending in the same month last year (assuming your spending habits were similar).

Be cautious when deducting any costly one-time purchases you made. Similarly, you should take into consideration any changes in your lifestyle from month to month. Your food spending figures are likely to be distorted and less comparable if, for instance, you cooked primarily for yourself in the same month a year later but hosted a dinner party the same month.

It might be simpler to use the ONS's personal inflation calculator if you don't want to perform the calculations yourself. You're prompted with a number of questions like these.

What housing situation do you currently occupy? A. Renting or paying off a mortgage)? How much does your household spend on food and drink? How much does your household spend on energy bills? The tool is interactive, so after you enter your data, it will compute your personal inflation rate automatically.

Being aware of your inflation rate is more than just a pointless curiosity. If necessary, you can make adjustments by noting areas of your budget where significant increases are occurring. You might be motivated to move to a less expensive supermarket if you discover, for instance, that your monthly food bill has increased by more than fifty dollars from a year ago.

What's in the shopping basket for ONS?

There are twelve sections in the CPI shopping basket. These consist of:

CPIH is another measure that includes council tax and owner-occupier housing costs. It also includes food and non-alcoholic beverages, alcohol and tobacco, clothing and footwear, housing and household services, furniture and household goods, health, transportation, communication, recreation, and culture, as well as restaurants and hotels, among other goods and services. These are the expenses related to house ownership, upkeep, and occupancy.

Retail Prices Index (RPI) was used prior to CPI becoming the official inflation measure. "CPI vs. RPI inflation: what is the difference between ONS measures" compares the two indices.

Forecast for inflation: where will prices go next?

Price pressures have accelerated once more in 2025 after momentarily regaining the 2 percent target last year. Inflation increased from 3 percent in June to 3 percent in July.

By the second quarter of 2027, the Bank of England anticipates that inflation will have slowed to its target level after peaking at 4 percent in September.

This year, a number of factors have contributed to rising inflation, such as rising food, energy, and water prices. Additionally, there has been some uncertainty brought on by world events, such as US President Donald Trump's changes to trade policy.

After the minimum wage and payroll taxes were raised in April, some analysts believe that increased employment costs in the UK may have contributed to the pressure in recent months. Companies have previously stated that in order to cover the expense, they may try to increase prices.

Nevertheless, some of these pressures are expected to ease by the end of the year, according to economists.

According to economist Edward Allenby of the consulting firm Oxford Economics, "the positive contribution from the energy category should disappear entirely from October." As the effects of the stronger sterling gradually take hold, food price inflation is also anticipated to gradually decline in the last few months of this year and into 2026.

Since services make up 80% of the UK economy, services inflation, which was 5% in July, may stay fixed for a while. But according to Allenby, it will cool "steadily" in 2026.