Comment: Inflation stubborn at 8.7%

Following today’s inflation data being released by the ONS, here is some commentary from pension and personal finance experts:

 
Mohsin Rashid, CEO of ZIPZERO, said: “With grocery inflation finally on a downward trend, the whole nation will breathe a collective sigh of relief – perhaps we truly are on the way back to calmer times.

“Supermarkets have demonstrated real character over the past few weeks by passing on cost savings. We’ve seen most chains announce price cuts to a significant batch of products that consumers will no doubt be thankful for.

“Yet the good news does not hide the fact that when it comes to food inflation we are at the top of a very big peak, and we are limping back to the bottom. Meanwhile, core inflation remains sticky, raising concerns over how entrenched it is within the UK economy. Expect higher interest rates tomorrow. And expect Britons to keep the purse strings tight for still some time, with a savvy marshalling of financial resources and an emphasis on money-saving techniques like loyalty and reward schemes to remain of utmost importance.”

 
Lily Megson, Policy Director at My Pension Expert said: “Today’s inflation data, showing no further fall, is a hard blow for consumers, and certainly for those nearing or in retirement. Many will have already seen the value of their hard-earned savings being eaten away throughout the cost-of-living crisis. As a result, the majority (55%) of Britons now feel that retirement is no longer possible, according to My Pension Expert’s research.

“The stark reality faced by millions of Britons cannot be ignored: the cost-of-living crisis continues to severely disrupt people’s retirement plans, forcing thousands back into the workforce or pushing back their eventual retirement date. Clearly, we cannot wait for inflation to steadily fall – much more must be done to empower savers who may be concerned about their financial future.

“Making sure that individuals are well-informed about how and where to find the right support, such as independent financial advice can make a significant difference in helping savers gain a better understanding of their financial situation. Most importantly, it can empower them to stay on the right path towards achieving the financially secure retirement they rightly deserve.”

 
Chieu Cao, CEO of Mintago, said: “Today’s data indicates that inflation is not falling as quickly as we would have hoped. The cost-of-living crisis in the UK rages on, which will also mean higher interest rates to come, placing even greater pressure on people’s finances.

“Behind the data is a very real, very human issue. People are struggling to make ends meet, and we cannot underestimate the impact inflation continues to have on people’s financial and mental wellbeing. We have to provide more support, and it is not just for the government to deliver this. Employers must also intervene and take action to protect their employees from financial devastation through targeted, impactful wellbeing support.

“Businesses will have their own financial challenges. But it is vital employers remember that a lack of financial support will lead to stressed, discontented employees. And frankly, that is akin to taking a wrecking ball to employee satisfaction, job performance and ultimately a business’s success.”

 
Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said: “As inflation remains stubborn at 8.7%, high prices and doggedly-low interest rates on savings accounts from high street banks mean that millions of savers are still losing money in real terms – potentially hundreds of pounds a year. According to SmartSave research, just 9% of UK savers have opened a new bank account in the past 12 months, and many will be missing out on better returns by remaining loyal to their existing bank, rather than shopping around for the best rates.

“Millions of UK households will still be feeling a strain on their finances, so it’s more important than ever to secure the best possible interest rates on money that is set aside in savings accounts. Some of the best-performing products will come from providers that savers may not have heard of, and considering fixed-term savings accounts rather than easy access can often be key in securing better rates.”
 
James Henderson, Portfolio Manager of Henderson Opportunities Trust and Lowland Investment Company:

“Today’s figures show that the inflation rate remains stubbornly high.. We must consider, however, that inflation tends to be a lagging indicator of where the real economy is. We have already seen some food prices fall quite dramatically – the price of barley, for example, has fallen around 40% – and we are seeing softness in certain parts of the labour market, neither of which are reflected by today’s headline figure.

“Before inflation became the forefront issue that it is today, we were already seeing inflationary pressures in the market. Steel prices, for example were rising quite rapidly and this wasn’t reflected in the headline figures at the time. In the same way that official figures were slow to reflect changes in the real economy before inflation took off, today’s figures are lagging in the other direction in that they don’t truly represent softness we’re seeing in the market right now.

“This lag may be the reason the Bank of England was slow to put interest rates up to begin with, so investors will be watching to see how it responds to today’s figures when making its decision on interest rates tomorrow. Ultimately, investors are looking for a stabilisation and eventual reduction in rates to help combat some of the uncertainty they currently face. UK companies have already reduced their costs in response to the current environment so a fall in interest rates could lead to an improvement in operating profits on a reduced cost basis. This is crucial in terms of building investor confidence back up, encouraging capital expenditure and helping to drive productivity in the UK.”