Extract B: Inflationary Pressures and Changing Consumer Lifestyles

During 2023, the rate of inflation, measured by the Consumer Price Index (CPI), escalated significantly, surpassing the central bank's inflation target of 2.0%. High energy prices and global supply disruptions were key catalysts, driving up the cost of everyday essentials. Food price inflation reached double-digit figures, severely impacting lower-income households who spend a larger proportion of their disposable income on food and fuel.

As purchasing power declined, many households resorted to savings or unsecured personal loans to cover basic living expenses. In response, the Monetary Policy Committee raised the benchmark interest rate multiple times throughout the year to cool demand-pull inflation. However, average nominal wage increases failed to match the price hikes, resulting in a contraction of real wages and squeezed household budgets across the economy.

To ensure accuracy in measuring these cost-of-living changes, the national statistical agency updated the representative shopping basket used to calculate the CPI. Societal shifts, such as the widespread adoption of remote working, technological innovations, and a wider transition towards healthier diets and energy-efficient cooking methods, have necessitated these regular adjustments to ensure the basket accurately mirrors what modern households are actually buying.

Figure 1: Selected changes to the CPI basket of goods and services, 2023