UK inflation rises to 10.4%

  • Leanne Lancaster
  • 22 March 2023
  • 5 mins reading time

On Wednesday 22 March, the Office for National Statistics (ONS) released the latest inflation figure for the year to February 2022, at 10.4%. This represents the first increase in four months and was largely unexpected.

What does this mean?

Inflation indicates how quickly prices are rising over a set period of time. There are several different measures of inflation but the most quoted is the Consumer Prices Index (CPI), which looks at a typical basket of hundreds of everyday household goods and services. The numbers quoted above have been calculated using CPI, and the increase means that overall prices are increasing at a faster pace than the previous month.

The main drivers for the rise in CPI were due to the rising prices of food, restaurants and cafes, and clothing.

What does this mean in context?

Although the inflation rate has increased from the 12 months up to February 2023, it’s still below its peak of 11.1% in October last year.

Overall, the cost of eating out increased by 11.4% in the year up to February 2023, while the price of food and non-alcoholic beverages rose by 18.2% in the same period. This will continue to have a big impact on the cost of living for households.

Current inflation remains very high compared to the Bank of England’s target inflation rate of 2%. This means that interest rates are likely to rise further from 4% tomorrow, as the Bank of England tries to bring inflation down towards its target. Higher interest rates also have an impact on household costs, as they cause the cost of borrowing, such as mortgages, loans and credit cards, to increase.

In a historical context, inflation remains at multi-decade highs; for most of the past 20 years, CPI has sat at around 2%. Wage increases have been much smaller than the current increase in prices, resulting in much-reduced disposable income for households, or even families not having enough income to cover essential costs such as food, energy and other bills.

What do policymakers think is going to happen with inflation?

In his Spring Statement on 15 March, Jeremy Hunt announced that the UK economy is set to avoid a recession and inflation is on track to fall to 2.9% by the end of the year.

Read more: Spring Statement 2023

The Office for Budget Responsibility, an independent ‘watchdog’ for the Treasury, forecast an ‘improved outlook’ compared to November 2022, when it predicted that inflation could fall to 4% by the end of 2023.

What could you do about inflation?

If you are unsure how current inflation rates affect your finances, now could be a good time to contact a financial adviser for help. We could help build a financial plan that helps you feel more in control even in times of high inflation. There are no hidden fees or charges at Schroders Personal Wealth, and you’ll only pay if you choose to go ahead with the recommendations in your personalised financial plan.

Important information

The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.

There is no guarantee by investing money it will keep level or beat inflation, particularly when inflation is high.

Forecasts are not a reliable factor of future performance.

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