Inflation rate could 'rise further' for UK says Ken Clarke
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The ONS reports that the Consumer Price Index (CPI) hit 4.2 percent last month from 3.1 percent in September. This represents a far bigger jump in inflation that many economists expected and will no doubt cause concern for the Bank of England which had previously aimed for a two percent inflation target. One of the main causes of this rise in inflation was the 12 percent hike in the energy price cap on household bills, which came into effect on October 1, 2021.
Martin Lawrence, Director of Investments at the Wesleyan Group, the specialist financial services mutual, said: “Inflation is now well past the Bank of England’s two percent target, driven by factors such as supply chain bottlenecks, labour shortages and rising energy prices.
“As inflation has continued its upwards march, our research shows that almost a fifth (17 percent) of British savers have already changed how they manage their money, with the most popular course of action being to move into – or increase – investments in the stock market.
“A further 26 percent of people intend to make changes in the future, and today’s announcement could spur them into action. However, a greater worry is that more than a third (35 percent) of those surveyed said they have no intention of taking any action, due to not fully understanding how to better manage their money.
“With inflation rising and interest rates, for now, remaining at historic lows, bridging this knowledge gap will be imperative to help savers protect their hard-earned funds against real-term attrition.”
Economists believe the recent cap in energy price will exacerbate inflation even further in the months to come as the next review will take into account the rise in wholesale gas prices over the summer.
Addressing how the energy bill hike has impacted inflation figures, Grant Fitzner, chief economist at the ONS, explained: “Inflation rose steeply in October to its highest rate in nearly a decade.
“This was driven by increased household energy bills due to the price cap hike, a rise in the cost of second-hand cars and fuel as well as higher prices in restaurants and hotels.
“Costs of goods produced by factories and the price of raw materials have also risen substantially and are now at their highest rates for at least 10 years.”
Many experts believe this surprising rise is yet another blow to working families who are trying to get back on their feet following the pandemic and subsequent lockdowns.
Andrew Tully, technical director at Canada Life, said: “Inflation rising to 4.2 percent is another damaging blow to households and families up and down the country who have already been struggling to balance the books in the face of soaring costs for petrol, energy and other basic items.
“Not only will this have an effect on those pensioners with fixed incomes who will see their spending power continue to fall. We could also see people start to deprioritise their pension saving as wages are made to stretch further to cover rising costs.
“If inflation continues to grow unchecked we could start to see the undoing of some of the great strides forward made by auto-enrolment.”
More to follow…
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