Finance · Real Life · Cost of Living
Here is a sentence that sounds like a contradiction but is not: inflation is falling, and everything is still more expensive than it was.
The trolley that tells the truth
You feel it at the till before you ever read it in a headline. The weekly shop costs more than your memory insists it should; the same trolley is heavier on the receipt than a couple of years ago. That gap between what you remember paying and what you actually pay is the real cost-of-living story. The official numbers, read carefully, explain exactly why it will not simply melt away; the news has started to sound calmer.
Inflation cooled to 2.8 per cent in the year to May 2026, according to the Office for National Statistics, a world away from the double-digit peak of late 2022. That sounds like relief, and in one sense it is. But here is the part that catches people out. Disinflation means prices are rising more slowly, not coming down. Over the last three years, UK prices have climbed by more than 20 per cent, a figure the House of Commons Library lays out plainly. The rate has eased. The level has not, and it is the level you pay. A slower rise on top of an already higher base is still a higher shop, which is precisely why the recovery in the data has not shown up in your wallet.
Where the squeeze actually bites
Under the average, pain is uneven, and averages hide what you feel. Food price rises have slowed sharply, down to around 2.2 per cent, which genuinely helps. But transport has pulled hard the other way, with the wider transport category up close to 7 per cent and motor fuels alone climbing more than 20 per cent over the year. Services inflation, the price of everything from a haircut to a repair, is still running near 4 per cent. Housing and household costs have been the single largest upward force on the overall index month after month. So the story isn’t one number; it’s a tug of war, and depending on how you live, whether you drive, rent, or eat out, your experience can look nothing like the tidy headline.
This is the quiet truth the single figure obscures. There is no such thing as your inflation being 2.8 per cent, because 2.8 per cent is a national average of a basket of around 700 goods and services weighted for a typical household. You are not typical, and neither am I. If a large slice of your money goes on rent, fuel and childcare, your lived inflation may be well above the headline while someone else’s sits below it. The ONS even publishes a personal inflation calculator for exactly this reason. Knowing your experience is real, and not a failure to appreciate good news, is oddly steadying.
The other half of the story is your pay
Prices are only one side of the ledger. What actually determines whether you are better or worse off is pay minus prices, what economists call real wages. If prices have risen by a fifth and your income hasn’t kept pace, you are poorer in practice even while the inflation figure falls. This quiet arithmetic makes a recovering statistic feel like no recovery at all. This is why so many people earlier this year were still reporting their cost of living was climbing even as the news told them the crisis was over.
I have learned to focus my attention on what I can actually move. The budget I can see, the outgoings I can trim, the income I can build: those are mine to work on. Knowing exactly where every pound goes, unglamorous as it sounds, gives a sense of control that a forecast cannot, because a forecast is someone else’s guess and a budget is my own decision. Headline inflation is not mine to move, so I refuse to let it set my mood. This isn’t advice on your finances, only how I keep my own head steady when the news gives with one hand and takes with the other.
The nudge
The single most useful thing you can hold onto is the difference between a rate and a level, because it explains almost everything you feel and most of what you read. If you want to see how the rate itself gets set, and why a handful of institutions can move your cost of living without asking you, I walked through it in three central banks, one lesson for your money. Understand that, and the cost of living stops being a mystery you endure and starts being a thing you can plan around.
The Jacqueline Brand — knowledge builds confidence, and confidence builds wealth. This is editorial commentary for information and education only. It is not financial, investment or professional advice, and nothing here is a recommendation to buy or sell any investment. The Jacqueline Brand is not authorised or regulated by the Financial Conduct Authority. The value of investments can fall as well as rise, and past performance is not a guide to future returns. Figures were correct at the time of publication. Always do your own research and consider speaking to a regulated adviser. Where cryptoassets are discussed, they are high risk and largely unregulated in the UK, and you could lose all the money you invest. The Collection
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