Inflation rate increases to 10-year high of 5.1% in November

The Consumer Prices Index (CPI) rate of inflation has soared to 5.1% in the 12 months to November, greatly exceeding the forecast from the Office for National Statistics (ONS) of 4.8%. This continues the worrying trend of month-on-month inflation spikes, up from 4.2% in October, which was itself a huge increase from the then record high of 3.2% in August. As of November, inflation is the highest it’s been since September 2011 when CPI was 5.2%. At that time, inflation rates were at 5.2%, meaning that at its current rate of increase, the UK’s inflation rate will reach a new record high come the new year.

What is the cause of this higher inflation?

As outlined in our previous article on inflation, there are currently many issues surrounding the  supply chains and the importing of basic materials. A lack of suitable lorry drivers compounded by shortages of basic building materials means the prices of many products are having to increase to compensate. 

A notable example of this is the computer chip – an essential component in digital technology that is currently in short supply around the globe. With the supply decreasing and the demand maintaining, inflation is an unfortunate side effect. 

Petrol prices also continue to rise, peaking at 147.5p per litre in November – the highest ever recorded. The food and drink industry is now warning that the increasing price of basic materials is beginning to have a “terrifying” effect on consumer prices. 

This recent trend of rising inflation is not limited to the UK’s economy, however. The latest figures from the US show a rate of inflation of 6.8% in the year to November which is the highest seen in the country for almost 40 years. 

How will this affect me?

The immediate impact of the inflation is a rise in the cost of living. Everything from food to petrol will be increasing in price, with the recent explosion in gas prices being a notable contributor. The lack of financial security that surrounds these turbulent price rises cannot be understated and planning for the future becomes more difficult as inflation rates continue to increase. 

Following the November figures, Chancellor Rishi Sunak assured the public that he was aware of the difficulties: “We know how challenging rising inflation can be for families and households which is why we're spending £4.2bn to support living standards and provide targeted measures for the most vulnerable over the winter months.”

It is also worth noting, as outlined in our previous article on inflation, that interest rates are intrinsically linked to inflation. Rising interest rates will negatively impact many people who are borrowing money or who have unpaid loans, increasing the amount having to be paid back. 

According to economist Janine Boshoff of the National Institute of Economic and Social Research, current projections indicate that inflation is unfortunately likely to be persistent and stay above 5% throughout the first half of 2022.

What impact does higher inflation have on cash savings?

We’ve produced a brand new, easy to use inflation calculator to illustrate how inflation can destroys your wealth and spending power without you even realising. Our calculator will show you how much you could be losing out by.

For example, if you have a deposit of £50,000 sitting in an account with your high street bank earning 0.01%, your money will have halved in real terms after 14 years – it will be worth just £24,954.

Have a go with the calculator today to see how inflation might affect your savings.

High inflation is understandably worrying. At The Private Office we share your concerns and want to do everything we can to help you make the right financial decisions in these uncertain times. If you’d like to know more, request a free non-committal initial consultation with one of our team or give us a call on 0333 323 9065 and get in touch.

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Please note: This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. The value of your investments can fall as well as rise and is not guaranteed.