You are here: Home - Saving & Banking - News -

Blow to households as inflation hits six-month high

Written by:
Consumer prices unexpectedly jumped to a six-month high in August dealing a blow to squeezed British households.

The Consumer Prices Index (CPI) rose to 2.7% up from 2.5% in July, according to figures from the Office for National Statistics (ONS).

Markets and economists had expected a small drop to 2.4%. But increased costs for recreational and cultural goods and services, transport services and clothing pushed the rate up for the second consecutive month.

Theatre tickets, transport and autumn clothing were the biggest upward contributors.

The latest figures mean that wage growth including bonuses, which is currently at 2.6%, has fallen behind inflation meaning Brits are once again getting progressively poorer in real terms.

Emma-Lou Montgomery, associate director for personal investing at Fidelity International, called the inflation figures “a body blow to UK households.”

Brexit uncertainty

Experts believe Brexit uncertainty could push inflation up further.

“Trade friction could see a material decline in Sterling, raising inflation significantly above current levels and leading to higher wage demands at a time of limited political strength,” said Nick Dixon, investment director at Aegon.

“Such wage pressure could exacerbate inflation and add pressure on the Bank of England to raise interest rates faster and higher than markets anticipate.”

Ben Brettell, senior economist at Hargeaves Lansdown, said: “The numbers reinforce expectations that policymakers will gently lift interest rates over the next couple of years.

“The figures won’t come as welcome news to the Bank of England though – they’ll be desperate to leave policy unchanged until we get some clarity over Brexit, and won’t want to be forced into a rate rise by accelerating prices.

“A rise to 1% is tentatively priced in for around May next year, though clearly a disorderly Brexit would force a dramatic rethink.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

  • RT @YourMoneyUK: Government plans cut to minimum shared ownership stake
  • RT @WeareJust_PR: “Families tend not to talk about money and death. But if we don’t talk about these themes it becomes very hard to make pr…
  • RT @RoyalLondon: Voluntary NI contributions to state pensions have risen - @stevewebb1 hails this as “great news that the message is gettin…

Read previous post:
The towns where house prices are most at risk from a ‘no deal’ Brexit

Areas where property prices are polarised between low-cost flats and high-value houses could see prices fall the fastest and furthest.