Jonathan Athow, deputy national statistician at the ONS, said: "August saw the largest rise in annual

inflation month-on-month since the series was introduced almost a quarter of a century ago.
"However, much of this is likely to be temporary, as last year, restaurant and cafe prices fell substantially
due to the Eat Out to Help Out scheme, while this year, prices rose."
In August this year, transport costs also increased.
Average petrol prices stood at 134.6 pence a litre, compared with 113.1 pence a litre a year earlier, when
travel was reduced under lockdown restrictions.
Used car prices were also partly to blame for price rises - they increased by 4.9% in just one month. Since
April, they have gone up by more than 18% amid a shortage of new models.

Ruth Gregory, senior UK economist at Capital Economics, told BBC Radio 4's Today Programme that price
rises seen in August were "almost unavoidable" because of the discounts available in 2020.
"Inflation, which is a year-on-year comparison, was always going to look strong compared to last year," she
said.
"Some of that rise reflected genuine factors too. In particular, we are now seeing the effects of higher
global shipping costs and shortages of staff driving up food price inflation."
She also expects, however, that the cost of living could continue to increase rapidly, with inflation
exceeding 4% by November.
Inflation now exceeds the Bank of England's 2% target, aimed at keeping cost increases steady.
.
The central bank's deputy governor, Ben Broadbent, insisted in July that it would not stop its efforts to
boost the economy, despite the forecast of higher costs.
"While we know [inflation] is going to go further over the next few months, I'm not convinced that the
current inflation in retail goods prices should in and of itself mean higher inflation 18 to 24 months ahead,
the horizon more relevant for monetary policy," he said.
Most of the inflation in goods prices was down to oil price rises and supply chain issues, he said, which was
likely to "fall away" in the early part of 2022.
But given that Wednesday's latest figures breach the Bank's target, it must now write to Chancellor Rishi
Sunak to explain what it will do to ensure that price prices are steady in future.

James Lyon Shaw, who owns the Greene Oak Pub in Windsor, Berkshire, told the BBC the rise in inflation
had to be taken in context and that businesses, including his own, needed to "ride the storm".
He is paying his employees 10 to 20% more an hour compared to last year due to the wider workforce
shortages.
He said increases in food prices depended on where restaurants and pubs source their food, with rises in
haulage and logistics costs hitting profit margins.
"We just have got to get through, you've got to be pragmatic, get on and adapt your business."
He questioned if people had enjoyed access to "cheap food" for too long and whether there needed to be
a shift in attitudes to pay for more sustainably produced products.

Knowledge check questions

1. What is meant by the term inflation? (2 marks)

2. What is Bank of England’s target for inflation? (1 mark)
3. Give two reasons which the article states may have caused an increase in inflation? (2 marks)
4. What may happen to inflation by November? (2 marks)
5. Give two reasons how inflation has impacted the food industry? (4 marks)

Exam style question

1. Explain the impacts of inflation on business (6 marks)

2. Explain the impacts of inflation on customers (6 marks)
3. Explain the impacts of inflation on the government (6 marks)