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

Households squeezed as inflation climbs to 3%

0
Written by: Paloma Kubiak
17/10/2017
Inflation hit 3% in September, marking the biggest squeeze on UK households in five years.

The Consumer Price Index (CPI) rose from 2.9% in August, the Office for National Statistics (ONS) confirmed. This figure was last higher in March 2012.

The main contributors to the uptick in prices were higher costs within the restaurant and hotel sector, recreation and culture, transport, as well as for food and non-alcoholic beverages.

UK consumer price inflation including owner occupiers’ housing costs (CPIH) came in at 2.8% in September, up from 2.7% in August.

With inflation a full percentage point above the Bank of England’s 2% target and the fact it is outpacing wage growth, this may now add further pressure on the governor to raise interest rates.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The pound in your pocket is depreciating, as the rising price of goods continues to chip away at its value. Consumer spending remains remarkably resilient in the face of inflationary pressures and weak wage growth, but the current squeeze on household budgets is a slow burner, as it takes some time for economic reality to hit home.

“The tick upwards in inflation will increase expectations of a rate rise from the Bank of England later on this year, stoked by a flurry of hawkish rhetoric coming from Threadneedle Street. This wouldn’t be the first time the bank has talked the talk without walking the walk however, so it’s probably best not to count those chickens until they’re hatched.”

He added that inflation has been above this level for around four of the last ten years, and it’s only since 2014 Brits have become accustomed to inflation running below the Bank of England’s 2% target.

Calum Bennie, Scottish Friendly’s savings specialist, said: “Interest rates have to rise to help tackle inflation and the sooner this happens, the better. Mark Carney must recognise the wolves are now at the door and take action to strengthen the pound even though this may increase mortgage costs.

“Consumers have been dealt a double blow of poor income growth and rising shop prices over the past year. For many, this has increased dependency on credit, but with defaults now on the rise it’s clear that many families are finding it nigh on impossible to balance the books. Evidently, it’s not a lending hand they need from the Bank of England right now, but a savings one.”

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.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

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.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week