When the rate of inflation hit 10.1% in July 2022, it was treated as a pretty big deal—and if you crunch the actual numbers, it's not difficult to see why. With inflation at 10%, it means you're paying £11 for every tenner you would have spent last year, assuming you're buying the same amount of the same things. That tenner you have in your pocket is therefore worth less than it was the year before, since you can buy less with it. Assume that you're spending £1,000 instead of £10, and suddenly your costs are going up by £100 from one year to the next.
Because inflation's measured as a percentage, the bigger the purchase the more the price rockets up. In fact, it can still get pretty scary when you work out what all those price bumps on smaller purchases add up to, as well. That's why governments set themselves a target for inflation, aiming to stop it from spiralling out of control. With the inflation target set at 2%, it's then up to the Bank of England to hit the mark. Why 2% instead of 0% or even less? Well, strange as it sounds, having an economy's inflation rate fall too low can actually be a little unhealthy. A negative inflation rate, for instance, would see prices generally dropping over time. A situation like that can actually end up with people slowing down their spending, because they expect costs to be lower if they wait. That makes sense for your personal wallet, but if enough people do it then businesses get into trouble and people can start losing their jobs. Generally, having a low but steady inflation rate is considered healthier for everyone, because it keeps the money flowing through the economy and helps everyone plan out their finances better.
As for what the Bank of England's got to do with this, they use something called the Bank Rate to influence inflation. Again, this can get a little complicated, but the basic idea is that the Bank Rate is the interest the Bank of England pays to banks and building societies that hold accounts with it. When the Bank Rate goes up, the interest those banks and building societies offer to the rest of us tends to go up too. This encourages people to save more and spend or borrow less (because the interest rates rise on loans as well as savings). In turn, this sucks money out of circulation and generally drags inflation down. Dropping the Bank Rate, on the other hand, encourages people to spend and borrow more instead of saving, which can push inflation rates higher.