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UK inflation remains at 4%

But what does that mean for you?

UK inflation for the year to the end of January rose by 4.0% – the same rate as in December.

According to the Office for National Statistics, the largest upwards contributors to the monthly change were housing and energy services while the largest downward contribution came from furniture and household goods, and food and alcoholic beverages. Food prices saw their first monthly fall for over two years.

But what does this data mean for you?

We’re still all under the cosh from the cost-of-living crisis, and inflation is still some way ahead of the Bank of England’s 2% target, however, we might begin to see a reduction in UK interest rates over the next year.

Food prices fell from 8% to 7% but bear in mind that prices have increased by a whopping 25% over the last two years. Core Inflation, which is the most important input in the Bank of England’s interest rate policy, remained at 5.1%, which may delay the intention of cutting rates.

In real terms, prices are still rising and many people are still struggling. The cost-of-living crisis might not be an everyday headline anymore but it’s not over and for those on the lowest incomes it’s likely to remain an issue for many months to come.

Retailers were disappointed by low Christmas sales, however, for consumers, this may mean more sales and offers are available. Grab the bargains while you can!   

Those struggling with their mortgage repayments have little to be cheerful for, but there are still opportunities elsewhere that people can capitalise on to strengthen their finances. Hopefully the government will review the property cap of £450,000, as this seems unrealistic for much of the country.

Wages are rising, as indicated by ONS employment data, which could put some upward pressure on demand. Business owners, contractors, and professionals may need to reassess their day rates to ensure they don’t lose out. The Bank of England predicts that price rises will reaccelerate in the second half of the year, reflecting the persistence of inflationary pressures.

In summary, we are still in a period of inflationary flux, and this may last longer than originally predicted. Keep an eye out for this year’s spring budget, with a general election in the offing, there may be some sweeteners. If you are concerned that you are under-protected or vulnerable to these factors, please speak to your accountant and your Broadbench adviser.  

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