Rising costs have led to the highest inflation levels in almost two years.
The Office for National Statistics (ONS) have announced that inflation has risen to 1% in September, up from 0.6% in August. The increasing price of goods such as clothing and fuel has been attributed to the rise in inflation, with the ONS stating that there is “no explicit evidence” that the low value of the pound was a contributing factor.
How Will You Be Affected?
The 1% inflation level is the highest since November 2014, and while it is a low value historically, it is the biggest month-on-month increase since June 2014. So what does this mean for you in real terms? If wages do not rise with inflation, and prices of food, clothes and fuel continue to rise due to a weak pound, the cost of living could grow by a noticeable amount. If inflation rises past the Bank of England’s 2% target, it is likely that interest rates will be put up in an effort to counteract it. If this happens, those that owe money on mortgages would be hit with larger monthly bills. Other debts would reduce in value though, as while the debt amount would remain the same, the value of each pound in the debt is lower. That should make it easier to pay off the debt if the level of inflation is prolonged.
Pensioners could find it difficult to make their savings stretch. State pensions are protected by triple lock, which means the value rises each year either in line with inflation, average earnings or 2.5%, whichever is the highest amount. Private pensions are not insured in the same way though, and if the cost of food and fuel rises, those relying on private pensions and savings to live could struggle.
The BBC website has more on rising inflation and the decreasing value of the pound. If you would like more information on how you will be affected by inflation, or on how to make the most of your pensions and savings, please get in touch.