The headline inflation rate in the UK has registered its biggest jump ever, from 2% in July to a nine-year high of 3.2% in August. Earlier this summer, the Bank of England said annual prices are expected to increase to 4% before the end of the year, before dropping slightly.
It is the measure of how much the prices go up and down and is tracked by several different indexes. The main used par economists is the Consumer Price Index (CPI), which records the cost of a basket of 700 items including food, transportation and
The rate is a year-to-year comparison, so a monthly jump in inflation does not mean that prices have increased so much since July. The data Office for National Statistics , which publishes the figures, said the higher prices in transport, restaurants, hotels and for food and drinks had pushed the rate up in August.
He pointed out that in August2020 on an Eat to Help program was underway - as a result, restaurant prices were artificially low, so it will be much higher now in comparison, though not in terms historical. However, staffing and supply issues in the urban hospital industry has also pushed up prices, while the cost of gasoline at the pump is higher than at all moment since 2013 .
A Moderate inflation is not a bad thing - people will be more inclined to spend their money if they think they will buy less in the future. But high inflation has consequences. Of anyObviously, if you have a fixed salary, your money won't go that far every month.
Rising inflation at a time when interest rates are at record highs is bad news - your money will not have the same buying power when you withdraw it only when you put it away. Put simply, if you put £ 100 aside last year, it should be worth £ 103.20 to be the same in real terms. The best one-year account currently pays 1.5%, so your savings would be worth £ 101.50.
Switching to riskier investments is one way to save money. Try to beat inflation but there is always the possibility that you will lose money too. "For people to have a chance to keep their real returns, there are few options other than moving up the risk curve," says Simon Lister, independent financial adviser.on the Investing Reviews financial comparison site. "For the downpours at risk, it's a rout at the moment.
If high inflation levels persist longer than expected, the Bank may raise interest rates, which is good news for those who have money on deposit.
The opposite is true for borrowing. If you have a variable interest rate loan, an increase in the bank's base rate would increase your repayments. Fortunately, many people have gone for fixed rate mortgages, and the costs will stay the same even if the bank takes action.
And inflation reduces the the size of your debt in real terms. If this results in an increase in salary, then the amount you will have to repay each month will be less than your income than when you took out the loan for the first time.th time.
The interest rate on student loans is linked to inflation, so a high rate seems to be bad news for many with low income. university debts. The rate that matters is the RPI (Retail Price Index), which hit 4.8% in August, and students who started college from 2012 are expected to pay an interest rate of RPI. more 3.
The good news for them is that the rate is calculated based on the March figure, not September, when inflation is expected to increase further. The rate is also checked against the commercial personal loan rates and changed accordingly. It has been capped below RPI plus 3, and the government can step in if the RPI is still high.
Most workplaces do notDo not have to increase wages based on inflation, but this is often used in negotiations. Employers, who in some industries are already grappling with staff shortages, may need to increase wages to attract and retain workers who face higher living costs.
A number of benefits are linked to inflation, including the state pension. On the government suspended the “triple lockdown” of pensions this week last , but has committed to increasing pension payments in line with the CPI if September's figure is above 2.5%.
The September figure determines how much the elements of universal credit and other benefits will increase next April, its should therefore keep pace with rising costs. However, before that, the temporary £ 20 per week Some private pensions offer payments linked to inflation, so payments are expected to increase.