US and UK prices in August 2026 were 28–32% higher than in January 2021. Inflation slowing never meant prices falling, and in 2026 it is rising again.

The inflation of 2021 to 2024 did not end the way most people hoped. Inflation — the rate at which prices rise — came down from its 2022 peaks. Prices themselves did not. On official figures, US consumer prices in August 2026 were about 28% higher than in January 2021¹², UK prices about 32% higher³, euro-area prices about 27%⁴ and Canadian prices about 23%⁵. A household whose income rose less than that over the same years is poorer in what it can buy, even if its pay slip says otherwise.

And the story is not over. In 2026, the ECB says, conflict in the Middle East and the war in Ukraine pushed energy prices up again⁶; euro-area inflation rose to 3.8% in September on Eurostat’s flash estimate, with energy prices up 18.8% on the year⁷. This article sets out how high inflation went and where, what it did to food, energy and wages, the argument over whether company profits made it worse, how households coped, where it stands now, and what it means for a budget, a pay rise and a long-term plan. For the separate question of why medical and education costs rise faster than general prices, see inflation is not one number.

How high it went, and where it is now

The surge started with reopening after the pandemic, as demand returned faster than supply chains could follow, and turned into a cost-of-living crisis when Russia’s invasion of Ukraine in February 2022 sent energy and food prices up. For most rich economies it was the highest inflation in thirty or forty years. The timing differed by months, mostly because energy prices reached households at different speeds: quickly in the US, later in Europe, where regulated tariffs and price caps delayed the rise into the autumn of 2022.

Singapore’s own core measure, which leaves out accommodation and private transport, peaked at 5.5% in January 2023²¹ and was 2.2% in August 2026²². The 2026 rise is concentrated where energy matters most. Canadian petrol prices were up 22.8% on the year in August¹⁴; Australian electricity was up 13.2%, largely because government rebates ended¹⁶; US energy prices were up 16.3% while US prices excluding food and energy rose 2.4%². The ECB’s staff expect euro-area inflation to average 3.0% in 2026 and fall back to 2.1% by 2028⁶ — a projection, not a promise.

Food and energy: where households felt it

Headline inflation understates what many families went through, because the fastest rises were in things nobody can cut back on much. UK food prices rose 19.2% in the year to March 2023, the highest in over 45 years¹⁰. US food at home rose 13.5% in the year to August 2022, the most since 1979²⁵. Euro-area energy prices rose 41.5% in the year to October 2022¹². In India, food inflation hit 11.51% in July 2023 and 10.87% in October 2024, well after headline inflation had calmed²⁶²⁷.

Energy shows how much government policy shaped what households paid. Ofgem raised Britain’s price cap for a typical household by 80%, to £3,549 a year, from October 2022, and set it to rise to £4,279 in January 2023²⁸²⁹. The government’s Energy Price Guarantee then limited a typical household’s bill to about £2,500 a year³⁰. The ONS estimated that without it, prices for electricity, gas and other fuels would have risen by nearly 75% between September and October 2022, instead of the roughly 25% recorded⁹. In Singapore, household electricity tariffs were 23.3% higher on the year in the last quarter of 2022²¹.

Real wages: pay fell behind, then partly caught up

For most workers, pay rose — just not as fast as prices. The ONS recorded a fall in real regular pay of 3.0% in the year to April–June 2022, a record³¹; real pay returned to growth only in mid-2023³². In the US, real average hourly earnings fell 3.6% between June 2021 and June 2022³³. Canadian hourly wages rose 5.2% in the year to June 2022 against prices up 8.1%¹³; Australia’s wage price index rose 3.3% in the year to December 2022 against prices up 7.8%³⁴¹⁵.

Across the rich world the picture was the same. In early 2023, the OECD found nominal wage growth trailing inflation by 3.8 points on average across 34 member countries, with real wages falling in 30 of them³⁵. By early 2025 real wages were growing again in 33 of 37 countries, by 2.5% on average, but were still below their early-2021 level in 18 of them³⁶; in the US, real wages remained 2% below³⁷. Wages rising faster than prices for a while is not the same as winning back what was lost.

Did profits make it worse? The greedflation debate

Whether companies used the crisis to raise prices beyond their costs is one of the most argued questions of the episode, and the honest answer is that it depends on where and when you look. The case for a profit role is strongest in Europe. ECB President Christine Lagarde said in June 2023 that unit profits contributed around two-thirds of euro-area domestic inflation in 2022, against an average of about one-third over the previous two decades³⁸. An IMF working paper estimated that rising profits accounted for 45% of the increase in euro-area consumer prices between early 2022 and early 2023³⁹. In the US, Kansas City Fed economists found markups rose 3.4% in 2021 while inflation was 5.8%, suggesting they could explain more than half of that year’s inflation — though they argued firms were pricing in expected future costs rather than exploiting market power⁴⁰.

The case against is just as well documented. San Francisco Fed economists found that aggregate US markups stayed essentially flat while core prices rose more than 10%, concluding that rising markups were not a main driver of inflation⁴¹. In Britain, the Competition and Markets Authority found that competition problems were not driving food inflation, and that operating profits in grocery retailing fell 41.5% in 2022/23⁴²; it did find that about three-quarters of branded suppliers of products such as infant formula, baked beans and pet food had raised their unit profits⁴³. The fair summary: energy and supply shocks started it; in some sectors and some economies, firms then widened margins; how much that added is still disputed.

How households coped

Surveys show the same three responses everywhere: buy less, buy cheaper, and draw down savings. In mid-2022, 91% of British adults told the ONS their cost of living had risen over the past month; of those, 62% were spending less on non-essentials and 53% using less fuel at home⁴⁴. In the Federal Reserve’s survey of 2022, 35% of US adults said they were worse off than a year earlier, the highest since the question was first asked; 64% had switched to cheaper products and 51% had reduced their savings because of higher prices⁴⁵.

The cushion ran out. San Francisco Fed researchers estimated that US households’ excess savings from the pandemic peaked at about $2.1 trillion in August 2021 and had been fully used up by March 2024⁴⁶⁴⁷. The share of US adults who would cover a $400 emergency with cash was 63% in 2022, down from 68% in 2021, and still 63% in 2025, when just over nine in ten called price increases a minor or major concern⁴⁵⁴⁸. In Britain in July 2026, 56% of adults said their cost of living had risen in the past month, down from 79% in April, and spending less on non-essentials (59%) was still the most common response⁴⁹.

Why prices do not come back down

The question people ask most is when prices will go back to normal. They almost certainly will not, and central banks do not want them to: every major central bank targets inflation of about 2% a year, so success means prices rising slowly from today’s level, not falling back to 2021’s. The Bank of England’s explainer notes that UK inflation averaged 2% from 1997 to 2021 before peaking at about 11% in 2022⁵⁰. Falling prices across the board — deflation — usually come with recessions and job losses, which is why policy is set to avoid them. Individual prices do fall: Indian tomato prices were 31.09% lower in August 2026 than a year earlier, even as onion prices rose 48.27%²⁰.

Why it feels higher than the official figure

Many people are sure inflation is higher than the official number, and there is research on why. Francesco D’Acunto and colleagues found that people form their sense of inflation from the prices they see most often, such as groceries and fuel, weighting them by how often they buy them rather than by how much of their budget they take⁵¹. Food and fuel rose fastest and are bought weekly. Stefanie Stantcheva’s surveys found people dislike inflation mainly because they believe their own pay does not keep up⁵² — which, for 2022 and much of 2023, the real-wage data above says was true. The official figure is an average across all households; a household that spends more of its money on food, energy or rent can face a higher rate than the average.

What it means for your budget and your pay

The first adjustment is to re-base. Kate, 39, an office manager in Leicester, earned £45,000 in January 2021. To buy what that bought then, she needed about £59,300 in August 2026, on the UK consumer price index³. Jordan and Mia in Columbus, Ohio, with $85,000 of household income in January 2021, needed about $108,900 to stand still¹². Aisha, an engineer in Calgary, needed about C$110,600 to match a C$90,000 salary⁵. Anything less than that is a pay cut in what the money buys, whatever the headline raise was.

The second is to judge every pay rise against inflation, not against zero. A 4% rise in Britain with prices up 3.1% in the year to August 2026 is a real rise of about 0.9%¹¹. Ramesh and Kavita in Chennai, offered 6% when Indian inflation was 4.82%, would gain about 1.1% in real terms²⁰. When negotiating, the inflation figure for the year just gone is the floor, not the ask; the real-wage data shows how long it can take to recover ground once it is lost³⁶.

The third is to find where the rise is concentrated in your own spending. Nathan and Divya in Perth, paying A$2,000 a year for electricity, face about A$2,264 if their bill tracks the 13.2% national rise in the year to August 2026¹⁶. That is a line they can shop around for or reduce; general inflation is not. A household that knows which of its costs are rising fastest can act on those rather than cutting everything a little. The working method is in budgeting methods compared and how to save more.

The national figure hides wide differences. In India in August 2026, food inflation on the new series was 5.95%, above the 4.82% headline, and prices in villages rose 5.23% against 4.31% in towns and cities²⁰. In Singapore, where headline inflation was a modest 2.3%, MAS noted that elevated global energy prices had already pushed up household electricity and gas tariffs²². A family in Coimbatore that spends half its budget on food, or a Tampines household with a large air-conditioning bill, faces a higher rate of its own than the average suggests.

What it means for long-term plans

An inflation shock does its lasting damage through the price level. A plan made in 2021 that assumed 2% a year is now priced in money that buys roughly a fifth to a quarter less, so the target needs re-basing to today’s prices before anything else. Cash and fixed deposits lose most in a surge, because their rates lag prices, and a surge drains them from the other side too: the Fed’s 2022 survey found half of US adults had cut their saving to meet higher prices⁴⁵. Shares and property have historically kept up with inflation over long periods, but not reliably over one or two years; bonds fell badly in 2022 as rates rose (interest rates and your money). Edward Chancellor’s *The Price of Time* argues that the long period of very low rates before 2022 set up some of what followed⁵³.

1. Re-base your spending: write down what you spend now, not what you spent before 2022, and use that in any plan.
2. Find your own inflation rate: which of your costs rose most, and which you can change.
3. Check every income line against inflation: pay, pensions, rent received. Note which are index-linked and which are not.
4. Keep an emergency fund in cash, but do not hold long-term money there; a few years of inflation can take a large part of its value.
5. Test your long-term plan against a few years of higher inflation, not only the central bank’s target.
6. Revisit your plan once a year with the latest inflation figures, rather than reacting to every monthly release.

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