Interest rates are expected to fall this year as inflation drops back towards the Bank of England’s 2pc target. Borrowing costs have hit 16-year highs as policymakers try to stop prices rising at an uncontrollable pace. However, elevated interest rates have caused pain for mortgage holders and limited the spending power of consumers, impacting businesses. Read on for your guide to everything you need to know about inflation, interest rates and how changes in borrowing costs affect you. Inflation is the term used by economists and governments to describe the speed at which prices are rising. In Britain, we usually measure inflation by comparing the price of a particular item to its price at the same time the previous year. For example, if a chocolate bar costs £1 in April 2023 and then in April 2024 it costs £1.04, its price has risen by 4pc and thus inflation for this particular item stands at 4pc. However, statisticians have to calculate the pace of price rises across the whole of the economy and use a variety of methods to estimate this as accurately as possible. The most closely followed of these methods used by the Government and the Bank of England...