Inflation Calculator UK

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Cumulative price change
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Average inflation rate --
Converted amount
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Price difference --
CPI in --
CPI in --
Inflation in --
Inflation in --

The UK inflation calculator is used to calculate the inflation rate in the United Kingdom. It can be used to calculate the purchasing power of the UK pound in a specific year as compared to any other year in the past. The pound inflation calculator calculates:

  1. Cumulative price change in the UK from one year to another
  2. Average inflation rate in the UK
  3. The converted amount for the given amount
  4. The price difference from one year to another
  5. CPI (Consumer Price Index) in base years, and
  6. Inflation in base years

By using this currency inflation calculator, you can power up your currency conversion from previous years to the current year, and you can also calculate inflation rates in the United Kingdom with CPI and difference in prices.

How to use our UK inflation calculator?

It is a complex process to calculate the inflation rate and other inflation-related values manually. The money time converter above is there for the very same reason. It makes these calculations a hassle-free task by facilitating you and providing results at one click.

To use inflation calculator pounds, enter the amount in pounds in the first input box. Select the year for which you need to calculate the inflation rate, CPI, or price change. Then, select the year to which you need to compare the inflation rate or the price difference. Click the "Calculate" button, and it will give you the detailed results in a moment. It will give you accurate results for the above-mentioned terms as well as a tabular representation of all the years that you have selected. The table includes inflation and converted amounts for each year between base years. It will also provide you a graphical representation of all calculations so that you can understand all results and calculations easily.

What is Inflation?

Inflation is a phenomenon of rising economic prices. A more accurate definition of inflation is a constant price rise in an economy. Inflation means an increase in living costs as goods and services prices increase. The inflation rate calculates the yearly price change in price in percentage.

The value of money decreases as a result of inflation. It means that today your capital will not buy as much as you could buy last year or month. If commodity prices increase, the same amount of money buys a smaller amount of products as compared to earlier.

How to calculate Inflation rate in UK?

The inflation in the UK can be calculated using the following formula:

GBP value in nth year = GBP value in Base year × (CPI in nth year / CPI in Base year)

In this equation, nth year refers to the year for which you want to find the inflation rate, the base year refers to the comparison year, and GBP value is the value of Great Britain Pound.
Let us assume we want to calculate the inflation rate in 2020 for 1 pound as compared to 1860.

We know that our nth year is 2020, and the base year is 1860. CPI of the United Kingdom in 1860 was 9.3, and in 2020, it was 1138.2433607545. The GPB value in the base year will be 1 pound because we are calculating the inflation rate for £ 1. Substitute all these values in the above formula.

GBP value in 2020 = \(1 \times \Big(\dfrac{1138.2433607545}{9.3}) = \pounds 122.39\)

£ 1 in 1860 was equivalent to £ 122.39 in 2020, which depicts the change in purchasing power in almost one and a half centuries. For the 160 years from 1860 to 2020, we use the following equation to obtain the overall inflation rate.

Cumulative inflation rate = \(\Big(\dfrac{\text{CPI in 2020} - \text{CPI in 1860}}{\text{CPI in 1860}}\Big) \times 100\)

Place the values in the above formula to get the cumulative inflation.

Cumulative inflation rate = \(\Big(\dfrac{1138.2433607545 - 9.3}{9.3}\Big) \times 100 = 12.139 \%\)

How to Compare Inflation of 2 years in United Kingdom?

In the year 2020, cumulative rates are 12,139.18 % higher than average prices since 1860, according to the Office for National Statistics or you can see UK Inflation Rates. The average inflation rate of the UK Pound in this period was increased by 3.05 percent per year, which resulted in declined value for British Pound.

For example, £ 1 in 1860 is about £ 122.39 in 2020. In 160 years, purchasing power differed by £ 121.30. The inflation rate in the year 1860 was 3.33 %. Refer to the table in the end of the post for historical inflation rates. The estimated rate of inflation this year currently stands at 1.5%. If this is retained, £ 1 will be equivalent to £ 1.01 next year for purchasing power.

What are the causes of Inflation?

There are several causes of inflation, but excessive total demand, such as too fast economic growth or cost-push issues such as supply-side factors are the main causes of inflation. These are the further causes of inflation in an economy.

Demand-pull inflation:

If the demand for products and commodities increases and the supply of commodities remain low, inflation will occur. It is related to the fast growth of the economy.

Cost-push inflation:

Inflation can increase if the cost of the products and commodities increase, and there are no alternate products available at a lower price in the market.

Devaluation:

If the demand for imported goods is high and the prices of those goods increase, it will cause inflation in the economy.

Increase in income:

If the wages in a country get boosted, then the purchasing power of individuals will increase, and it will infect the inflation.

Inflation forecasts: 

The expectations of inflation or forecasts cause wage increases to be demanded by employees and businesses to raise prices of products.

How devaluation causes inflation?

Devaluation leads to a fall in currency value that makes imports very costly and exports much more competitive. A devaluation is generally likely to contribute to inflationary pressures as import prices increase, and export demand also rises. The overall impact, however, depends on the economic situation and other inflation factors.

In theory, for three reasons, a devaluation may cause inflation:

  • Demand-pull inflation
  • Cost-push inflation
  • Less opportunities in the long-term to reduce costs.

Money printing and Inflation

It will cause inflation if the supply of money increases faster than real revenues. The quantity of products does not change if you print more money. Nonetheless, people will have more money and resources to invest in assets or to buy goods if you print more money. When more money goes after the same amount of goods, businesses are only going to put prices up.

What is Food Inflation?

It is an inconvenience to mourn when food prices rise in developed countries. But as food prices in the developing world increase, it can be difficult to eat what you want or even and lead to an increase in poverty.

Depending on the weather, the costs of agricultural products tend to vary because both demand and supply are inelastic. However, food prices appear to show a strong upward movement in recent years and have reached record highs despite the regular volatility.

Issues with inflation estimation

Changes in goods quality mean that price increases may not reflect inflation, but it implies that it is an improved good. Computers, for example, have a lot more functionality than they had twelve years ago, and price comparison is hard, because of the difference in the quality of the product.

Goods can also decline in quality as well as size. Vegetable prices may remain constant, but the price per unit may increase efficiently if they decrease. It is often a reaction to increasing inflation due to costs. For example, rather than increasing the price, companies tend to reduce the size of the products such as candies and cookies. The incremental decline in size may not be included in the calculation of inflation.

Numerous inflation indexes include various elements in the inflation index. CPI, CPIH, RPI, or RPIX are inflation measures. CPI excludes the mortgage payments, and it makes it difficult to choose which measures should be included.

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