The Retail Prices Index (RPI) measure of inflation for the year to July came in at 3.6%, according to the Office for National Statistics (ONS).
While an innocuous figure on its own, many people may not realise its significance, particularly when it comes to deciding rail fares.
This is because the Government uses this figure as part of a formula to cap the price of regulated rail fares.
It uses the July RPI plus 1% to cap the 45% of regulated rail fares, including season tickets on most commuter journeys, some off-peak return tickets on long-distance journeys and flexible tickets for travel around major cities.
So, commuters could potentially see a rail fare hike of up to 4.6% in 2025.
However, in December 2023, the Government deviated from this to cap rail fare rises at 4.9%. If it hadn’t, commuters would have faced a 10% price hike.
It also took the decision to move the timing of when the price hike would come into effect. Usually, rail fare price increases take hold in the New Year, but this year, passengers paid higher prices from March 2024, a change first brought in for 2021.
Laura Suter, director of personal finance at AJ Bell, said: “In recent years, the Government has deviated from the usual practice of raising rail fares by this amount every January by delaying the price increase as well as reducing it from the headline RPI rate during periods where it was sky high.
“Now inflation is back to more normal levels, it may decide to return to the standard playbook of an RPI increase in January. The decision on this may be announced at the Budget in October, or be delayed until closer to Christmas – but commuters will want certainty over how much they are paying as soon as possible.”
YourMoney.com understands there will be an update on changes to regulated rail fares later this year.
A Department for Transport spokesperson said: “The Transport Secretary is delivering the biggest overhaul of our railways in a generation, to provide better services for passengers, while saving millions of pounds in fees paid to the private sector.
“No decisions have been made on next year’s rail fares, but our aim is that prices are as affordable as possible for passengers.”
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