You’ll know the latest inflation data at 7am, but what is inflation?
Basically, inflation is the rate of increase in prices.
It directly affects our overall cost of living, and if wages don’t increase at the same pace, the value of money decreases.
In recent years, the war in Ukraine has had a major impact on food and gas prices, which are affected by a variety of factors including global conflicts. Some argue that Brexit has also had a negative impact.
In the UK, inflation is measured monthly to compare how much prices have increased compared to the same period last year.
Inflation, a headline often seen in the news, measures the rise in prices of various products needed in our daily lives.
The most commonly used inflation measure is the Consumer Price Index (which was updated today at 7am), which is targeted at 2% by many Western governments.
It should be noted that a decline in the inflation rate does not mean that prices are falling, but simply that prices are rising at a slower rate. To see an overall decline in prices, we would need a negative number, i.e. negative inflation.
Why does inflation affect interest rates?
The Bank of England raises interest rates to control spending and encourage savings, which tends to lower prices and inflation.
When inflation falls, interest rates also tend to fall.
Potential winners and losers from high inflation
Overall, high and volatile inflation is widely believed to be bad for the economy, but there are some people who benefit from it.
Workers with wage bargaining power (perhaps those belonging to strong unions) are in a better position because they can protect their income by bidding for higher wages. Masu.
If prices rise faster than costs, producers may end up making a profit.
People who own stocks and real estate may also see their asset values rise if price inflation continues.
But retirees on fixed incomes are likely to be far worse off as inflation erodes the real value of pensions and other savings.
The poorest members of the population will feel the pinch even more as they face higher debt, food and utility bills.
