The jump in prices in August was the greatest on record. However specialists state it was mainly driven by discount rates in the hospitality industry which any rise will be “temporal”.
Others, however, state it was a momentary stagnation that conceals strong inflationary pressures constructing in the economy.
But why is inflation so essential?
What is inflation?
Simply put, inflation is the price at which prices are increasing – if the expense of a ₤ 1 jar of jam surges by 5p, then jam inflation is 5%.
It relates to services also, like having your nails done or obtaining your car valeted.
You might not notice low levels of inflation from month to month, but in the long term, these price surges can have a huge effect on just how much you can acquire with your cash.
Exactly how is it measured?
The Workplace for National Stats (ONS) watches on the prices of hundreds of daily products, from cinema tickets to smart-speakers.
This is what’s known as the “basket of goods”, as well as it’s being constantly updated. For instance, this year the ONS included hand sanitiser, wise watches as well as workout devices, after lockdown altered lots of people’s costs behaviors.
Even more weight is provided to points we spend more cash on – if the price of petrol rises by 1p, that will have a bigger effect on the headline inflation price than, claim, 1p on a book of second-class stamps.
The ONS releases its procedure of inflation every month – showing how much these prices have actually risen since the very same date in 2015 – known as the Consumer Prices Index or CPI.
UK inflation highest in 9 years
FintechZoom talked with Mihir Kapadia, the CEO of Sun Global Investments.
Mihir Kapadia said :
“The surge in UK inflation to 3.2% in August, the highest in nearly a decade, is a blow to consumers especially coming just after the announcement on the hike in National Insurance contributions. However, there are several factors which mean that inflation 12 months ago was artificially low including the impact of the “Eat Out to Help Out” scheme and todays numbers in part reflect an adjustment to a more normal trend for prices.
The Bank of England has forecast inflation will continue to rise, caping at 4% by the end of the year – double their target, before falling back towards their target of 2% in 2022 and 2023. However if this does not happen and inflationary pressures persist , the Bank of England may be forced to raise interest rates in the next twelve months. This is more likely if the recent strong economic growth trends continue and the labour market absorbs most of the workers who are released into joblessness after the furlough scheme is unwound.”