Energy prices are dropping, wages are increasing and the rising cost of food is slowing down
Amber Middleton
Content writerInflation rates are dropping which will have some positive impacts on families across the UK – here's how it will affect you
Wages are rising quicker than the rising cost of food, meaning we finally have more we can do with our money.
Energy rates are also dropping and food is no longer skyrocketing in price.
All this good news is to do with the rate of national inflation dropping this month.
But while Rishi Sunak said that this is 'welcome news', he added that more can be done to get inflation down even further still to help households across the UK with the cost of living.
- Households to get £75 supermarket vouchers
- Martin Lewis spots £10 1L bottle of Baileys
- Thousands to get £100 Cost of Living payment
- £270 payments coming this week
What is inflation?
Inflation is the increase of the price of something over time.
For example, if you buy milk for £1 this year, and next year it is £1.07, then the annual inflation for milk is 7%.
If inflation drops, for example from 7% to 5%, this doesn't mean that costs will go down. Instead, it means that it rises less quickly.
What's the latest with national inflation?
Inflation has been increasing since the beginning of 2021, causing a cost of living crisis.
This happened due to several factors including the war in Ukraine, and the after-effects of the pandemic.
According to the Office for National Statistics, inflation reached a peak of 11% in 2022, but the banks want this to be at an easy level of 2%.
We're sitting in the lower-middle of that currently at 4.6% for October. The Bank of England expects this to be down to 2% by the end of next year.
The Prime Minister added: 'We know many people are continuing to struggle, which is why we must stay the course to continue to get inflation all the way back down to 2%.'
Fall in energy costs
The energy cap dropped last month which meant energy bills will be decreasing, meaning the average household could save £151 a year.
This cap, set by the government, has led to the overall rate of inflation dropping last month.
The effect of inflation on food
The inflation of food and drinks has dropped from a whopping 19% in March down to 10% in October. While this is still high, food costs are rising at a slower level.
The ONS noted that the slowing of yoghurt (of all things) was a contributing factor in this – but added that the prices of milk, cheese, eggs and vegetables all helped out with the slowing of prices.
Speaking on food costs, George Weston, the chief executive of Associated British Foods, said: 'I would not be surprised if by the middle of next year, and even by Easter, most of the big price inflation had gone away.'
Meaning the costs of food would become more manageable again.
But this is dependent on no major problems happening – whether it be more wars or pandemics.
What does inflation mean for my pay?
Wages are now increasing at a higher rate than the prices of goods. This is the first time this has happened since 2021.
Wages rose to 7.7% while the prices of things are at 6.7%, meaning we're finally getting more bang for our buck once again.
What does this mean for benefits?
The Government uses September’s figures to set benefits payments for the financial year. So when inflation is high, benefits might be kept high too, to help those on low incomes with living costs.
With the rates still high, it's likely we'll see increases in some payments.
The Chancellor's budget will take place next week on 22 November and we will have a definite idea of what this means for benefits claimants for the following year.
More money advice
If you're looking for more money tips and tricks, we've got plenty of advice that may help.
Head to our Cost of Living Hub for information on what benefits and entitlements you may be able to claim.
There you'll also find tips from Money Saving Expert Martin Lewis himself as well as brilliant ideas for saving money and budgeting advice.
Related stories
When will the third Cost of Living payment be made?
