six ways to tackle inflation

Inflation measures how much prices rise over time. It is officially measured by the Office for National Statistics (ONS).

As a key measure of inflation, the ONS tracks the prices of around 700 everyday goods and services in a representative 'basket'. The total cost of this basket forms the consumer price index (CPI). The overall figure, reported each month, is the percentage change in the CPI from a year earlier. Previously, inflation was measured using the Retail Price Index (RPI), which tends to be higher. It is still used for some purposes, including setting regulated train fares.

The latest CPI inflation rate for October 2025 was 3.6%. This means that on average, what cost £100 last year would now cost £103.60.

Inflation has fallen slightly from September's 3.8% rate, but that doesn't mean prices have stopped rising. It just means they don't grow as fast as they used to. For prices to stop rising, inflation must be 0%. For prices to fall, inflation must be negative – this is known as deflation.

Inflation is important: it means that the same money will buy less every year. This also has an impact on interest rates as the Bank of England is tasked with keeping inflation stable and as close to 2% as possible.

When inflation is too high, the bank usually raises interest rates to make borrowing more expensive and saving more attractive, the goal of which is to cut costs and cool rising prices. When inflation falls, the Bank may lower interest rates.

This affects the cost of your mortgage and your savings rates.

Everyone has different shopping habits. And most people don't make large purchases, such as a car or an expensive vacation, that are included in the CPI basket, every year.

The ONS has Personal inflation calculator to help you see how quickly the cost of your out-of-pocket costs increases based on what you actually buy.

To use the calculator, you'll need to enter detailed information about your household's expenses, such as mortgage or rent, energy bills, food, transportation, and vacations. The calculator will then calculate how your individual inflation rate compares to the UK average.

Your personal inflation rate matters because no two households spend money the same way: People who spend the majority of their income on food or energy may face much higher inflation than the official CPI figure suggests.

Knowing your personal inflation rate can indicate where your budget is suffering the most and help you take action. For example, realizing that you're spending £50 more a month on food than you were a year ago may make you reconsider your grocery shopping habits.

Over the past year, price increases for everyday food items such as bread, fruit, vegetables, dairy and meat have outpaced overall inflation. The latest data from research firm Worldpanel by Numerator shows annual grocery inflation was 4.7% in the four weeks to November 2, down from 5.2% in the previous four-week period.

“Everyone has different shopping habits. Your personal inflation rate can indicate where your budget has been hit the hardest.”

Switching to a budget supermarket can help you cope with food price inflation. Which? Research shows Aldi is consistently the cheapest supermarket, followed by Lidl. If you are shopping elsewhere, please make sure you are registered on the site. any loyalty scheme to access the best offers.

To further reduce your expenses, set a weekly budget, write a shopping list and stick to it. Choose private label products, buy in bulk when there are discounts, and choose seasonal or frozen items, which tend to be better priced.

Energy bills may have dropped since their 2023 peak, but we're still paying significantly more for gas and electricity than before the energy crisis.

A fixed rate can protect you from future price increases. Some tariffs offer savings of almost £200 compared to Ofcom's electricity price cap, which is set to rise. up to £1,758 from 1 January 2026.

For example, Outfox Energy's 12 month fixed deal offers an average annual bill of £1,570, saving £188 on the January price cap. Alternatively, an annual Ecotricity fix will typically save you around £155 per year.

If you turned up the heat during the recent cold snap, keep warm by keeping drafts out and heating only the rooms you need. You can also reduce your energy consumption by turning off lights and appliances and choosing eco settings for your appliances.

Inflation can destroy savings in cash accounts, reducing the purchasing power of your money over time. If your savings account's interest rate is below the rate of inflation, you are losing money in “real” terms, even if your account balance grows.

About half of savings accounts have outperformed the current inflation rate of 3.6%, according to financial data provider Moneyfacts. To make your money grow in real terms, you need to transfer your money to one of these accounts.

In the market for easily accessible savings, online banks have the best rates: assistant pays 4.48% AER (falling to 3.48% after six months) on balances of £10,000 or more, Kahoot offers 4.4% per year and Chip 4.37%.

Outstanding one-year fixed-rate bonds currently offer the same rates as easy access accounts – LHV Pank has the best rate at 4.46%. One advantage of fixed rate bonds is that they usually have a significantly higher limit than easy access accounts – for example, you can save up to £1 million on an LHV one-year bond.

For investors, things are much rosier than before. October 2022, when inflation peaked at 11.1%. – at that time it was impossible to find a savings account to beat him.

If you're looking to save for the long term, investing may be a more effective way to protect your money from the effects of inflation.

To beat inflation, you usually need to invest in assets that earn returns above interest rates. Over time, stocks and shares have historically offered this potential. They often outpace inflation, although this is not guaranteed.

It is important to remember that investing involves risk. Spreading your money across different types of assets, such as stocks, bonds and real estate, can help diversify your portfolio regardless of inflation or interest rates. Starting early, paying regularly, and focusing on the long term will help your portfolio keep pace with inflation and potentially grow in real terms.

Finding investments that are completely protected from inflation can be difficult, but a certain type of government bond known as indexed securities can help you protect your money from rising prices.

When you buy indexed securities, you are effectively lending money to the UK government. In return, it promises to return your initial investment, adjusted for inflation as measured by RPI, as well as regular interest payments. You will receive the full amount, adjusted for inflation, when the bond reaches its maturity date, which is usually several years later.

Gold is often seen as a strong hedge against inflation because its value tends to remain stable or even rise when the purchasing power of money falls. Unlike cash, which loses value as prices rise, gold is a tangible asset with a limited supply, making it less vulnerable to currency fluctuations. But keep in mind that the price of gold can be volatile and does not generate returns, so it is not guaranteed to always keep pace with other long-term investments.