Interactive Investor

Inflation hits 5.4%

19th January 2022 09:42

Jemma Jackson from interactive investor

interactive investor comments as figure hits 30-year high.

Commenting, Myron Jobson, Personal Finance Campaigner, interactive investor, says: “UK Inflation has soared to its highest rate in nearly 30 years, powered by rising costs of energy, transport, food and soft drinks, furniture and household goods in particular. Consumers can attempt to mitigate these costs by actively seeking discounts, but many households have no option but to grit their teeth and weather the higher prices by making sacrifices.

“For some it may involve cutting back on extras such as takeaway dinners and entertainment subscriptions, but the decisions are starker for low-income households living on a tight budget with little room to spare. Many are faced with having to making difficult decisions about heating and eating.

“The financial pinch brought about by the rising cost of living threatens to turn into a stranglehold for many household budgets in the coming months, with the Bank of England itself has predicted inflation will rise to about 6% by spring.

“To make matters worse, the average pay has not been able to keep up with surging prices, meaning that earnings don’t go as far. There is little respite for consumers.”

Savings

“Surging living costs continues to take its toll on cash savings despite interest rates creeping in in recent weeks following the modest uplift to the base rate in December. Those planning to leave money aside for five years or more should consider whether they’ve struck the right balance between cash savings and investments.

“While everyone needs a cash buffer for emergencies and unexpected costs, investing can be a great way to beat inflation and grow your wealth over the long term. Equities can help to guard against inflation, but returns are not guaranteed, and you have to be prepared for some bumps in the road.”

Key points:

  • The Consumer Prices Index (CPI) rose by 5.4% in the 12 months to December 2021, up from 5.1% in November.
  • Price rises in transport, food and non-alcoholic beverages, furniture and household goods, and housing and household services were the largest contributors to the monthly rate in December 2021.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.