A 1.36 percentage point difference in an annual rate sounds negligible. Compounded over two decades, it isn't.
| Rate | What it represents | £10,000 becomes |
|---|---|---|
| 2.0%/year | Bank of England's official target | £14,859 |
| 3.36%/year | Recent UK average (2015-2026) | £19,366 |
The gap between the two outcomes — £4,507 — is larger than the entire starting sum's worth of "extra" inflation, purely from a 1.36 point annual difference compounding for 20 years. This is the same mechanism that makes a wage rise that merely matches the BoE target quietly fall behind actual prices, year after year, if real inflation keeps running above target.
Inflation doesn't feel dramatic in any single month — it's a slow, steady erosion. The size only becomes obvious once you look at a multi-year, compounded total rather than one year's percentage change in isolation.
Adjust any amount forward or backward through time using real sourced UK inflation rates.
Use the Inflation Calculator →