UK inflation unexpectedly rises to 4%

UK inflation is at its highest level since 1977

UK inflation increased unexpectedly to 4% in December – double the Bank of England’s inflation target and above the 3.8 % previously forecast by economists.

Lily Megson, Policy Director at My Pension Expert, has commented on the news, saying: 

“Evidently, the battle against inflation is far from over.

“This surprise rise has dealt yet another blow to many consumers who are trying to rebuild their savings after the challenges they’ve faced throughout the past two years. The question, crucially, is how can Britons restore their financial confidence and get to grips with this ever-moving economic climate?

“Everyone deserves – and, frankly, needs – to understand how to manage their finances effectively. But it’s an area where consumers have historically been let down in this country. It is so, so important that government does more to engage with the financial services sector to develop policy that ensures Britons have accessible routes to financial education and advice, meaning they are better equipped and empowered to achieve their financial goals.”​

Jatin Ondhia, CEO of Shojin, also commented: 

“This is not the news that people wanted to see at the start of a new year. But investors shouldn’t let this shock increase derail their plans. It was just 0.1% and, given interest rates remain elevated, there are new opportunities.

“The question is whether this is a blip or it signifies more inflation troubles in 2024. If indeed inflation does start to steadily fall again, the base rate is also expected to be cut later this year. So, people will need to consider how they respond to these shifts, as well as broader considerations, such as ‘What happens if the UK economy enters a recession?’ and ‘What might the upcoming general election mean for my investments?’. To that end, given this lingering economic and political uncertainty, we should still expect diversification to remain a prominent trend this year.

“A balance of savings products and lower-risk investments will, for many investors, be balanced alongside some higher-risk investments, providing the opportunity for greater growth in the medium- to long-term. However people choose to manage their finances in 2024, it will be fascinating to see the trends that take shape, given that the investment landscape has evolved markedly when compared to a year ago.”

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