How has inflation affected you and your family over the past 5 years?
It shouldn't surprise anyone that inflation continues to stoke anger and resentment across the UK, as many households feel the pinch of rising prices in their day-to-day lives.
Is Inflation Actually Easing?
Although the official inflation rate has shown signs of easing, dropping to around 1.7% for grocery inflation by September 2024, this slight decline offers little comfort to the 60% of British households still grappling with the soaring costs of essential items (Source: Kantar).
Fuel prices, energy bills, and housing costs remain at the heart of this crisis, with energy bills hitting record highs, leaving 43% of households struggling to pay their utilities, particularly those in more deprived areas. For renters, the situation is even more dire, with over a third facing rent hikes, further exacerbating financial strain.
Many feel that government policies, such as the energy price cap and cost-of-living payments, offer little more than a temporary plaster on a much deeper wound. Criticism mounts as the economic policies appear to fail in addressing the root causes, leaving millions of Britons to rely on food banks or cut down on essential expenditures like heating and electricity to make ends meet.
In fact, food banks have seen a sharp 37% increase in demand compared to the previous year, illustrating the devastating impact inflation is having on household finances.
When Will Inflation Feel Normal Again?
The promises of central banks and policymakers to tame inflation feel hollow to those already on the edge. Interest rate cuts and policy tweaks may sound good on paper, but the effects of policy change aren't felt for many for several months.
The resentment isn’t just rooted in the present difficulties - it’s fuelled by a broader feeling of neglect. The recent October Budget announcement did little to alleviate these concerns, and many argue that the government's measures continue to fall short. While some argue that the central bank's decisions, like interest rate hikes, aim to curb inflation, ordinary citizens feel they’re paying the price without seeing any real relief (Sources: Office for National Statistics; House of Commons Library).
Inflation has left many Britons feeling disillusioned, believing that the government’s responses are failing to tackle the realities they face each day. Until more substantial and impactful measures are put in place, this anger is likely to deepen.
How To Beat Inflation
Inflation is a mysterious macroeconomic beast that is going to keep us all on the financial treadmill for life. As the purchasing power of your cash declines, you'll need to find ways to protect yourself.
Historically, equity investments have been a great hedge against inflation because efficient companies increase their profits in line with inflation. However - equities are generally more volatile, and represent a level of risk that is unsuitable for many investors.
For those approaching retirement that might wish to secure a level of guaranteed income, you may have the option to index an annuity to increase with inflation.
To find a suitable solution for you, the best thing to do is to seek Independent Financial Advice.
We're experts in all areas of Financial Planning. As a truly Independent and family-owned group of financial advisers, we can help you find the right solutions for you and your family.
Get in touch for a free no-obligation initial meeting today.
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