Four things the latest inflation figures tell us

The UK’s inflation rate increased to 2.3% in October 2024.¹ Inflation peaked at 11.1% two years ago, but even though it didn’t continue to sky-rocket, rising inflation is still affecting us. Here are four things the latest inflation figures tell us - and how they may affect you.

1. The cost-of-living crisis is still going strong

Prices have risen across the board: you only need to look at a supermarket aisle to see that. The price of goods and services is 24% higher than it was in October 2020, largely due to rising energy and food prices.¹ A small amount of inflation is considered necessary for a healthy economy, but high inflation is seen as harmful. The target rate for the Consumer Prices Index (CPI) measure of inflation is 2%.¹ At 2.3% this year, we’re not that far off. So, what might this mean for you? While some (not all) people are experiencing wage increases, those on benefits, such as Universal Credit, may be left behind. Most benefits are going up by 1.7%, which may not match the rising prices.¹

2. Inflation is vaporous

Analysts predicted a smaller than 2.3% rise in inflation, but one month's figure doesn’t necessarily speak to the overall trend we’re seeing in the market.¹ We need to consider all of the data to get a clear picture of what’s going on - which is difficult as some of the driving forces behind rising prices are not coming from the UK. For example, high energy costs are largely reflective of rising energy prices in the global market, which are then having an impact on British bills.¹

3. Interest rate cuts are going to be cut more slowly

The base interest rate set by the Bank of England is currently 4.75%, having been cut from 5% this autumn.¹ Cutting interest rates makes loans cheaper, which can encourage more spending. This may encourage growth and increase demand for goods and services, which can lead to rising prices. Raising interest rates increases loan costs, which might lead to less spending and lower prices. The Bank is still expected to reduce interest rates, but as we are seeing higher than expected inflation, they are now cutting interest at a slower rate than we previously expected. For homeowners, this means that fixed rate mortgages have been going up despite cuts. Renters have also seen their prices rise by 8.7%.¹

4. The future is uncertain

Global and domestic events can have a big impact on prices, but what impact they have remains to be seen. Donald Trump’s pledge to create a blanket tariff of 20% on all imports outside of the USA could lead to higher prices everywhere, including the UK.¹ The rise in National Insurance paid by employers could also lead to higher prices - or fewer jobs as more people are made redundant.¹ The outcome of global conflict could help settle global economics - but it’s very hard to tell what the impact might be.¹

Sources

1.    https://www.bbc.co.uk/news/articles/ce8yp69n6z3o

All the information in this article is correct as of the date of publishing. The opinions expressed in this publication are those of the authors Euxton Mortgage Market. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

December 2024