Monetary SpaceA GUIDE TO UK MONETARY POLICY

Data as of 18 October 2026

INFLATION DRIVERS · October 2026

Where inflation is, and what has driven it

Not scored. Outcomes and slow-moving context, then three model-based ways to split inflation into its sources, looking back.

01

MOMENTUM AND CONTEXT · NOT SCORED

Where inflation already is

These are outcomes or slow-moving context rather than drivers, so they are shown but not scored. Services inflation and pay are what second-round effects would show up in.

MeasureLatestDateA year earlierNote
Services CPI inflation3.4%Aug 20264.7%Mostly domestic costs; about 3¼% is consistent with 2% overall
Core CPI inflation2.6%Aug 20263.6%Excluding energy, food, alcohol and tobacco
Private-sector regular pay growth2.9%Jul 20264.6%3-month average, y/y; about 3¼% is target-consistent
5y5y implied inflation3.12%Oct 20263.03%Market-implied, 5–10 years ahead. RPI basis until 2030, CPIH after: not comparable with history
Trading partners' leading indicator100.7Sep 2026100.1OECD CLI, 100 = trend; euro area proxy and US weighted by UK exports
02

WHAT'S DRIVING INFLATION

Three ways to split inflation into its sources

Each method separates demand from supply and cost-push differently, and each is uncertain. Where they agree, the reading is more robust. They are re-estimated after data releases and are not scored.

Demand- or supply-driven? Category by category

Household-spending inflation, % y/y: categories whose price and quantity surprises move together count as demand-driven, opposite ways as supply-driven

Demand-drivenSupply-drivenAmbiguousTotal

048122016Q1: Demand-driven +0.4pp2016Q1: Supply-driven -0.1pp2016Q1: Ambiguous +0.1pp20162016Q2: Demand-driven +0.1pp2016Q2: Supply-driven +0.1pp2016Q2: Ambiguous +0.1pp2016Q3: Demand-driven +0.1pp2016Q3: Supply-driven +0.7pp2016Q3: Ambiguous -0.2pp2016Q4: Demand-driven +0.8pp2016Q4: Supply-driven +0.4pp2016Q4: Ambiguous -0.2pp2017Q1: Demand-driven +0.7pp2017Q1: Supply-driven +0.4pp2017Q1: Ambiguous +0.2pp2017Q2: Demand-driven +0.7pp2017Q2: Supply-driven +0.8pp2017Q2: Ambiguous +0.1pp2017Q3: Demand-driven +0.9pp2017Q3: Supply-driven +0.6pp2017Q3: Ambiguous -0.1pp2017Q4: Demand-driven +0.9pp2017Q4: Supply-driven +1.0pp2017Q4: Ambiguous -0.2pp2018Q1: Demand-driven +0.9pp2018Q1: Supply-driven +1.1pp2018Q1: Ambiguous +0.4pp20182018Q2: Demand-driven +0.8pp2018Q2: Supply-driven +1.2pp2018Q2: Ambiguous +0.2pp2018Q3: Demand-driven +1.1pp2018Q3: Supply-driven +1.3pp2018Q3: Ambiguous +0.1pp2018Q4: Demand-driven +1.4pp2018Q4: Supply-driven +0.1pp2018Q4: Ambiguous +0.6pp2019Q1: Demand-driven +1.0pp2019Q1: Supply-driven +0.4pp2019Q1: Ambiguous -0.0pp2019Q2: Demand-driven +0.3pp2019Q2: Supply-driven +1.1pp2019Q2: Ambiguous +0.1pp2019Q3: Demand-driven -0.0pp2019Q3: Supply-driven +1.1pp2019Q3: Ambiguous +0.5pp2019Q4: Demand-driven +0.4pp2019Q4: Supply-driven +0.9pp2019Q4: Ambiguous +0.2pp2020Q1: Demand-driven +0.1pp2020Q1: Supply-driven +0.5pp2020Q1: Ambiguous +0.1pp20202020Q2: Demand-driven -1.0pp2020Q2: Supply-driven +1.4pp2020Q2: Ambiguous -0.4pp2020Q3: Demand-driven +0.2pp2020Q3: Supply-driven +0.0pp2020Q3: Ambiguous -0.3pp2020Q4: Demand-driven +0.5pp2020Q4: Supply-driven -0.8pp2020Q4: Ambiguous +0.2pp2021Q1: Demand-driven +1.1pp2021Q1: Supply-driven +0.2pp2021Q1: Ambiguous +0.3pp2021Q2: Demand-driven +0.6pp2021Q2: Supply-driven +0.7pp2021Q2: Ambiguous +0.5pp2021Q3: Demand-driven +1.7pp2021Q3: Supply-driven +1.4pp2021Q3: Ambiguous +0.3pp2021Q4: Demand-driven +3.3pp2021Q4: Supply-driven +2.5pp2021Q4: Ambiguous +0.0pp2022Q1: Demand-driven +1.9pp2022Q1: Supply-driven +4.5pp2022Q1: Ambiguous +0.3pp20222022Q2: Demand-driven +3.7pp2022Q2: Supply-driven +4.9pp2022Q2: Ambiguous +2.3pp2022Q3: Demand-driven +2.6pp2022Q3: Supply-driven +7.8pp2022Q3: Ambiguous +0.4pp2022Q4: Demand-driven +1.6pp2022Q4: Supply-driven +8.6pp2022Q4: Ambiguous +1.3pp2023Q1: Demand-driven +5.2pp2023Q1: Supply-driven +6.3pp2023Q1: Ambiguous +0.1pp2023Q2: Demand-driven +3.7pp2023Q2: Supply-driven +3.4pp2023Q2: Ambiguous +1.3pp2023Q3: Demand-driven +2.8pp2023Q3: Supply-driven +2.4pp2023Q3: Ambiguous +1.5pp2023Q4: Demand-driven +2.3pp2023Q4: Supply-driven -0.2pp2023Q4: Ambiguous +1.3pp2024Q1: Demand-driven +0.8pp2024Q1: Supply-driven +0.1pp2024Q1: Ambiguous +1.7pp20242024Q2: Demand-driven -0.5pp2024Q2: Supply-driven +1.8pp2024Q2: Ambiguous +0.8pp2024Q3: Demand-driven +0.6pp2024Q3: Supply-driven +0.1pp2024Q3: Ambiguous +1.2pp2024Q4: Demand-driven +0.3pp2024Q4: Supply-driven +1.2pp2024Q4: Ambiguous +1.1pp2025Q1: Demand-driven +0.2pp2025Q1: Supply-driven +1.2pp2025Q1: Ambiguous +1.1pp2025Q2: Demand-driven +0.4pp2025Q2: Supply-driven +1.4pp2025Q2: Ambiguous +1.3pp2025Q3: Demand-driven +0.7pp2025Q3: Supply-driven +1.6pp2025Q3: Ambiguous +1.2pp2025Q4: Demand-driven +0.8pp2025Q4: Supply-driven +1.3pp2025Q4: Ambiguous +1.0pp2026Q1: Demand-driven +0.6pp2026Q1: Supply-driven +1.2pp2026Q1: Ambiguous +1.1pp
Latest (2026Q1): demand-driven +0.6pp, supply-driven +1.2pp, ambiguous +1.1pp.

Shapiro (2022) method on 39 ONS spending categories; excludes imputed rents. Sign-based splits are only set-identified: read the direction of change more than the levels.

Cost-push or labour market? A wage–price model

CPI inflation above 2%, q/q annualised, 4-quarter average, pp: contributions relative to a 2019Q4 labour market and no relative energy or food price growth

Energy pricesFood pricesLabour-market tightnessPay, expectations and otherCPI minus 2%

048122020Q4: Energy prices -1.0pp2020Q4: Food prices -1.1pp2020Q4: Labour-market tightness -0.1pp2020Q4: Pay, expectations and other +0.8pp2021Q1: Energy prices -0.8pp2021Q1: Food prices -1.2pp2021Q1: Labour-market tightness -0.1pp2021Q1: Pay, expectations and other +0.8pp2021Q2: Energy prices -0.1pp2021Q2: Food prices -1.6pp2021Q2: Labour-market tightness -0.1pp2021Q2: Pay, expectations and other +1.8pp2021Q3: Energy prices +0.1pp2021Q3: Food prices -0.9pp2021Q3: Labour-market tightness -0.2pp2021Q3: Pay, expectations and other +1.7pp2021Q4: Energy prices +1.2pp2021Q4: Food prices -0.0pp2021Q4: Labour-market tightness -0.2pp2021Q4: Pay, expectations and other +2.0pp2022Q1: Energy prices +1.3pp2022Q1: Food prices +0.3pp2022Q1: Labour-market tightness -0.3pp2022Q1: Pay, expectations and other +2.9pp20222022Q2: Energy prices +3.5pp2022Q2: Food prices +0.8pp2022Q2: Labour-market tightness -0.3pp2022Q2: Pay, expectations and other +3.3pp2022Q3: Energy prices +3.7pp2022Q3: Food prices +1.6pp2022Q3: Labour-market tightness -0.3pp2022Q3: Pay, expectations and other +3.1pp2022Q4: Energy prices +4.3pp2022Q4: Food prices +2.1pp2022Q4: Labour-market tightness -0.1pp2022Q4: Pay, expectations and other +2.6pp2023Q1: Energy prices +3.8pp2023Q1: Food prices +2.2pp2023Q1: Labour-market tightness -0.1pp2023Q1: Pay, expectations and other +2.3pp2023Q2: Energy prices +1.5pp2023Q2: Food prices +2.0pp2023Q2: Labour-market tightness +0.0pp2023Q2: Pay, expectations and other +3.0pp2023Q3: Energy prices +0.7pp2023Q3: Food prices +1.0pp2023Q3: Labour-market tightness +0.1pp2023Q3: Pay, expectations and other +3.0pp2023Q4: Energy prices -0.5pp2023Q4: Food prices +0.3pp2023Q4: Labour-market tightness +0.2pp2023Q4: Pay, expectations and other +2.1pp2024Q1: Energy prices -0.1pp2024Q1: Food prices -0.3pp2024Q1: Labour-market tightness +0.2pp2024Q1: Pay, expectations and other +1.7pp20242024Q2: Energy prices -0.6pp2024Q2: Food prices -0.8pp2024Q2: Labour-market tightness +0.2pp2024Q2: Pay, expectations and other +1.3pp2024Q3: Energy prices -0.6pp2024Q3: Food prices -0.8pp2024Q3: Labour-market tightness +0.2pp2024Q3: Pay, expectations and other +1.2pp2024Q4: Energy prices -0.6pp2024Q4: Food prices -0.8pp2024Q4: Labour-market tightness +0.2pp2024Q4: Pay, expectations and other +1.6pp2025Q1: Energy prices -0.6pp2025Q1: Food prices -0.4pp2025Q1: Labour-market tightness +0.3pp2025Q1: Pay, expectations and other +1.6pp2025Q2: Energy prices -0.3pp2025Q2: Food prices -0.1pp2025Q2: Labour-market tightness +0.3pp2025Q2: Pay, expectations and other +1.6pp2025Q3: Energy prices -0.1pp2025Q3: Food prices +0.1pp2025Q3: Labour-market tightness +0.2pp2025Q3: Pay, expectations and other +1.6pp2025Q4: Energy prices -0.2pp2025Q4: Food prices +0.1pp2025Q4: Labour-market tightness +0.2pp2025Q4: Pay, expectations and other +1.3pp2026Q1: Energy prices -0.2pp2026Q1: Food prices -0.0pp2026Q1: Labour-market tightness +0.1pp2026Q1: Pay, expectations and other +1.2pp2026Q2: Energy prices +0.1pp2026Q2: Food prices -0.2pp2026Q2: Labour-market tightness +0.1pp2026Q2: Pay, expectations and other +0.8pp
Latest (2026Q2): energy prices +0.1pp, food prices -0.2pp, labour-market tightness +0.1pp, pay, expectations and other +0.8pp.

UK Bernanke–Blanchard (2023) model: wage, price and expectations equations, 2001–2026. 'Pay, expectations and other' covers wage and expectations shocks and everything the model leaves out.

Which shocks? A sign-identified VAR

CPI inflation above the model's baseline (2.4%), q/q annualised, 4-quarter average, pp: median contributions of identified shocks

EnergyDemandDomestic supplyMonetary policyPandemic swingsOtherCPI minus baseline

048122016Q1: Energy -0.5pp2016Q1: Demand -0.4pp2016Q1: Domestic supply +0.2pp2016Q1: Monetary policy -0.4pp2016Q1: Pandemic swings +0.0pp2016Q1: Other -0.7pp20162016Q2: Energy -0.5pp2016Q2: Demand -0.4pp2016Q2: Domestic supply -0.0pp2016Q2: Monetary policy -0.4pp2016Q2: Pandemic swings +0.0pp2016Q2: Other -0.7pp2016Q3: Energy -0.4pp2016Q3: Demand -0.4pp2016Q3: Domestic supply -0.1pp2016Q3: Monetary policy -0.0pp2016Q3: Pandemic swings +0.0pp2016Q3: Other -0.6pp2016Q4: Energy -0.2pp2016Q4: Demand -0.4pp2016Q4: Domestic supply -0.2pp2016Q4: Monetary policy +0.1pp2016Q4: Pandemic swings +0.0pp2016Q4: Other -0.4pp2017Q1: Energy -0.1pp2017Q1: Demand -0.2pp2017Q1: Domestic supply -0.3pp2017Q1: Monetary policy +0.5pp2017Q1: Pandemic swings +0.0pp2017Q1: Other -0.1pp2017Q2: Energy -0.2pp2017Q2: Demand -0.1pp2017Q2: Domestic supply -0.1pp2017Q2: Monetary policy +0.7pp2017Q2: Pandemic swings +0.0pp2017Q2: Other +0.0pp2017Q3: Energy -0.3pp2017Q3: Demand +0.1pp2017Q3: Domestic supply -0.2pp2017Q3: Monetary policy +0.8pp2017Q3: Pandemic swings +0.0pp2017Q3: Other +0.1pp2017Q4: Energy -0.4pp2017Q4: Demand +0.1pp2017Q4: Domestic supply -0.1pp2017Q4: Monetary policy +0.9pp2017Q4: Pandemic swings +0.0pp2017Q4: Other +0.1pp2018Q1: Energy -0.3pp2018Q1: Demand +0.0pp2018Q1: Domestic supply -0.1pp2018Q1: Monetary policy +0.7pp2018Q1: Pandemic swings +0.0pp2018Q1: Other +0.0pp20182018Q2: Energy -0.0pp2018Q2: Demand -0.1pp2018Q2: Domestic supply -0.2pp2018Q2: Monetary policy +0.5pp2018Q2: Pandemic swings +0.0pp2018Q2: Other -0.2pp2018Q3: Energy +0.2pp2018Q3: Demand -0.0pp2018Q3: Domestic supply -0.1pp2018Q3: Monetary policy +0.2pp2018Q3: Pandemic swings +0.0pp2018Q3: Other -0.1pp2018Q4: Energy +0.2pp2018Q4: Demand -0.1pp2018Q4: Domestic supply +0.0pp2018Q4: Monetary policy -0.0pp2018Q4: Pandemic swings +0.0pp2018Q4: Other -0.2pp2019Q1: Energy +0.1pp2019Q1: Demand -0.0pp2019Q1: Domestic supply -0.0pp2019Q1: Monetary policy -0.3pp2019Q1: Pandemic swings +0.0pp2019Q1: Other -0.3pp2019Q2: Energy +0.1pp2019Q2: Demand -0.0pp2019Q2: Domestic supply +0.1pp2019Q2: Monetary policy -0.4pp2019Q2: Pandemic swings +0.0pp2019Q2: Other -0.1pp2019Q3: Energy -0.0pp2019Q3: Demand -0.0pp2019Q3: Domestic supply +0.1pp2019Q3: Monetary policy -0.3pp2019Q3: Pandemic swings +0.0pp2019Q3: Other -0.2pp2019Q4: Energy -0.1pp2019Q4: Demand -0.1pp2019Q4: Domestic supply -0.0pp2019Q4: Monetary policy -0.5pp2019Q4: Pandemic swings +0.0pp2019Q4: Other -0.3pp2020Q1: Energy +0.2pp2020Q1: Demand -0.3pp2020Q1: Domestic supply +0.4pp2020Q1: Monetary policy -0.8pp2020Q1: Pandemic swings +0.0pp2020Q1: Other -0.2pp20202020Q2: Energy +0.3pp2020Q2: Demand -0.4pp2020Q2: Domestic supply +0.3pp2020Q2: Monetary policy -1.1pp2020Q2: Pandemic swings -0.5pp2020Q2: Other -0.2pp2020Q3: Energy +0.4pp2020Q3: Demand -0.6pp2020Q3: Domestic supply +0.2pp2020Q3: Monetary policy -1.7pp2020Q3: Pandemic swings +0.4pp2020Q3: Other -0.4pp2020Q4: Energy +0.4pp2020Q4: Demand -0.7pp2020Q4: Domestic supply +0.2pp2020Q4: Monetary policy -1.7pp2020Q4: Pandemic swings +0.5pp2020Q4: Other -0.4pp2021Q1: Energy +0.1pp2021Q1: Demand -0.5pp2021Q1: Domestic supply -0.2pp2021Q1: Monetary policy -1.6pp2021Q1: Pandemic swings +1.0pp2021Q1: Other -0.5pp2021Q2: Energy +0.0pp2021Q2: Demand -0.3pp2021Q2: Domestic supply -0.2pp2021Q2: Monetary policy -1.3pp2021Q2: Pandemic swings +2.0pp2021Q2: Other -0.5pp2021Q3: Energy +0.1pp2021Q3: Demand -0.3pp2021Q3: Domestic supply -0.1pp2021Q3: Monetary policy -0.9pp2021Q3: Pandemic swings +1.8pp2021Q3: Other -0.2pp2021Q4: Energy +0.2pp2021Q4: Demand -0.3pp2021Q4: Domestic supply -0.0pp2021Q4: Monetary policy -0.5pp2021Q4: Pandemic swings +3.0pp2021Q4: Other +0.1pp2022Q1: Energy +0.3pp2022Q1: Demand -0.2pp2022Q1: Domestic supply -0.1pp2022Q1: Monetary policy -0.1pp2022Q1: Pandemic swings +3.5pp2022Q1: Other +0.4pp20222022Q2: Energy +0.7pp2022Q2: Demand +0.1pp2022Q2: Domestic supply +0.3pp2022Q2: Monetary policy +0.6pp2022Q2: Pandemic swings +4.0pp2022Q2: Other +1.2pp2022Q3: Energy +0.7pp2022Q3: Demand +0.4pp2022Q3: Domestic supply +0.2pp2022Q3: Monetary policy +0.9pp2022Q3: Pandemic swings +4.1pp2022Q3: Other +1.4pp2022Q4: Energy +0.7pp2022Q4: Demand +0.9pp2022Q4: Domestic supply +0.3pp2022Q4: Monetary policy +1.2pp2022Q4: Pandemic swings +3.2pp2022Q4: Other +2.0pp2023Q1: Energy +0.6pp2023Q1: Demand +1.2pp2023Q1: Domestic supply +0.3pp2023Q1: Monetary policy +1.2pp2023Q1: Pandemic swings +2.5pp2023Q1: Other +2.1pp2023Q2: Energy +0.3pp2023Q2: Demand +1.3pp2023Q2: Domestic supply +0.2pp2023Q2: Monetary policy +0.9pp2023Q2: Pandemic swings +1.7pp2023Q2: Other +1.7pp2023Q3: Energy +0.2pp2023Q3: Demand +1.4pp2023Q3: Domestic supply -0.1pp2023Q3: Monetary policy +0.5pp2023Q3: Pandemic swings +1.1pp2023Q3: Other +1.4pp2023Q4: Energy +0.2pp2023Q4: Demand +0.9pp2023Q4: Domestic supply -0.3pp2023Q4: Monetary policy -0.0pp2023Q4: Pandemic swings +0.5pp2023Q4: Other +0.5pp2024Q1: Energy +0.3pp2024Q1: Demand +0.8pp2024Q1: Domestic supply -0.2pp2024Q1: Monetary policy -0.3pp2024Q1: Pandemic swings +0.1pp2024Q1: Other +0.5pp20242024Q2: Energy +0.3pp2024Q2: Demand +0.5pp2024Q2: Domestic supply -0.3pp2024Q2: Monetary policy -0.6pp2024Q2: Pandemic swings -0.1pp2024Q2: Other +0.1pp2024Q3: Energy +0.2pp2024Q3: Demand +0.4pp2024Q3: Domestic supply -0.0pp2024Q3: Monetary policy -0.6pp2024Q3: Pandemic swings -0.3pp2024Q3: Other +0.1pp2024Q4: Energy +0.1pp2024Q4: Demand +0.4pp2024Q4: Domestic supply +0.1pp2024Q4: Monetary policy -0.4pp2024Q4: Pandemic swings -0.4pp2024Q4: Other +0.2pp2025Q1: Energy +0.2pp2025Q1: Demand +0.3pp2025Q1: Domestic supply +0.3pp2025Q1: Monetary policy -0.2pp2025Q1: Pandemic swings -0.4pp2025Q1: Other +0.3pp2025Q2: Energy +0.2pp2025Q2: Demand +0.3pp2025Q2: Domestic supply +0.5pp2025Q2: Monetary policy +0.1pp2025Q2: Pandemic swings -0.4pp2025Q2: Other +0.5pp2025Q3: Energy +0.2pp2025Q3: Demand +0.3pp2025Q3: Domestic supply +0.4pp2025Q3: Monetary policy +0.3pp2025Q3: Pandemic swings -0.4pp2025Q3: Other +0.6pp2025Q4: Energy +0.2pp2025Q4: Demand +0.1pp2025Q4: Domestic supply +0.4pp2025Q4: Monetary policy +0.4pp2025Q4: Pandemic swings -0.4pp2025Q4: Other +0.4pp2026Q1: Energy +0.2pp2026Q1: Demand +0.1pp2026Q1: Domestic supply +0.2pp2026Q1: Monetary policy +0.4pp2026Q1: Pandemic swings -0.4pp2026Q1: Other +0.3pp
Latest (2026Q1): energy +0.2pp, demand +0.1pp, domestic supply +0.2pp, monetary policy +0.4pp, pandemic swings -0.4pp, other +0.3pp.

Bayesian VAR (oil, GDP, CPI, Bank Rate, sterling; 1993–), sign restrictions on impact, 400 accepted draws. Model-based illustration, not a forecast.