Double digit inflation remains: Experts react

 
Andy Mielczarek, Founder and CEO of SmartSave said: “Although today’s CPI data shows that inflation is easing again, the latest numbers show that savers still need to plan carefully. Elevated prices mean that, without careful financial management, people around the UK are still losing money in real terms.

“Making the most of the right savings instruments is crucial. At the moment, rising interest rates mean that there are opportunities for those who are in a position to put aside a lump sum and allow that pot to grow. For those looking to secure the most competitive rates, looking beyond traditional high street banks is often the key to making better returns, while fixed-term savings accounts can provide savers with lucrative options.”
 

Lily Megson, Policy Director at My Pension Expert, said: “Following last month’s shock increase, Britons will welcome the return of slowing inflation. But we are far from the finish line; the threat to people’s finances prevails as inflation remains at eye-watering levels.

“For many, the concept of a financially secure retirement, after years of hard work and diligent saving hangs in the balance. Indeed, My Pension Expert’s latest research revealed that almost half (44%) of over-55s currently in work feel the cost-of-living crisis has rendered retirement entirely impossible.

“People need support, and they need it now. The Government must commit to taking steps to granting all Britons access to the necessary information to help them regain control of their financial futures. Improving access to independent financial advice, for example, would be powerful start. And in doing so, Britons will start to feel more in control of their finances, despite these continuously testing circumstances.”
 
 
Mohsin Rashid, CEO of ZIPZERO, said: “After last month’s surprise increase, everyone will be breathing a sigh of relief that inflation figures have dropped again.
 
“Yet, these figures can be confusing. We must remember that while the ‘rate’ is falling, inflation is still devastatingly high. Its impact is being felt every day across the country, forcing consumers to make hard choices and ongoing sacrifices.
 
“This is particularly evident with regard to food, which is increasing at a rate well beyond the average. Our research shows that consumers are being savvy, cutting back on meat and exploring frozen alternatives. Yet, savvy can only stretch so far; Britons’ mental and physical well-being is under threat, with many now having to prioritise feeding others over themselves. Food shoppers must be given some financial relief. Supermarkets pursuing endless price increases are heading down a path of mutually-assured destruction.”
 

 
 
Chieu Cao, CEO of Mintago, said: “It is important we acknowledge that today’s inflation data comes right in the middle of Stress Awareness Month. While prices are falling again, we cannot underestimate the huge impact the cost-of-living crisis is having on people’s financial wellbeing and, in turn, their mental health.
 
“It’s more important than ever that people are given the tools they need to navigate an extremely challenging economic climate. This is best done in the workplace, where not enough support is being provided. Indeed, Mintago’s own survey of over 1,000 UK employees this month has revealed that while 51% of people say their stress has increased notably as a result of the cost-of-living crisis, just 36% benefit from financial wellbeing support through their employer.
 
“By implementing better financial wellbeing support systems for their employees – whether that’s connecting staff with financial advisers, or giving them more control over their pensions – employers could alleviate much of the financial stress that so many people are facing by simply giving them a clearer image of their financial situation. Yes, inflation might be slowing, but today’s data shows there is no room for complacency; UK businesses should act to support staff as a keen priority.”
 
 
George Lagarias, Chief Economist at Mazars comments: “UK CPI fell slightly, but remained stubbornly above 10%, higher than economists expected. The fall is mainly due to the year-on-year effect and lower energy prices. The pace of deceleration is far from satisfactory. Core (non-energy) inflation remains persistent. This is not limited to services like restaurants and healthcare. Inflation in food and clothing is high.

“We still expect that UK inflation will drop significantly next month due to the year-on-year-effect. But it will take UK inflation longer to fall relatively to the rest of the developed world, because of Britain’s idiosyncrasies in the supply chain and the jobs market. Adding this number to the calculus, and barring any new financial accidents, we would expect at least two further quarter-point rate hikes before the Bank of England pauses.”
 
 
James Jones-Tinsley, Self-Invested Pensions Technical Specialist at Barnett Waddingham comments on what this could mean for the state pension:

“It seems inflation is finally moving in the right direction; but policy makers and state pensioners will be holding onto their sighs of relief, as inflation is yet to hit single digits.

“September’s inflation figure should, under the current policy, dictate the state pension for the 2024 tax year. Pensioners should be hoping for a return to a more feasible rate of inflation by then, to enable the Government to uphold the triple lock and secure a comfortable state pension increase next April. If inflation is still notably high, upholding the lock would look financially untenable. Of course, this is in the Government’s political best interest too; unless their hand is forced by the economic reality, they won’t want to make any changes until after a general election.”
 
Rob Morgan, Chief Investment Analyst at Charles Stanley, comments: “The headline moderation in inflation is little comfort for households. The month-on-month figure of 0.8% (compared with a rise of 1.1% in February) is a painful reminder that prices continue to climb and the cost of living challenges are not over.

Worryingly, food inflation seems the stickiest of all components with the one-month increase at 1.1%. Food prices are an alarming 19% higher than they were a year ago, a miserable situation for many households struggling to buy the essentials and make ends meet. Inflation is also broad based with only communication proving a slight decline in the official statistics for March. Very broadly, we have had a decade’s worth of ‘normal’ inflation in just two years, so it is little wonder that many households are finding it hard to make ends meet.

With the Bank of England set to increase rates again, the difficulties in the housing market look set to continue. So far, many households with fixed or discounted rates have been insulated, but if interest rates remain at higher levels more will be affected as time goes on. This will have greater knock-on consequences for consumer spending as the months go by.
 
What will happen to inflation, and what does it mean for interest rates?
 
Energy inflation is expected to continue to decline in coming months as last year’s spike in pump prices and energy bills drop out of calculations and reflect dropping wholesale prices. But that’s where the good news ends for the Bank of England. The labour market remains tight and food and services inflation is proving troublesome. There is a growing suspicion the UK’s inflation is of the stickier variety, and there is much more work for the Bank to do. It means the job of reining in price rises without inflicting collateral damage on the economy looks increasingly tricky to pull off.

Overall, a further interest rate rise in May to cool price rises further is looking all but nailed on. Yet the Bank will find it an uncomfortable decision with the economic picture weakening and lingering concerns over financial stability following high-profile bank failures.

Like other major central banks, the Bank of England is near the end of its interest rate hiking cycle but will likely maintain tight policy for the remainder of the year, meaning no significant rate cuts until 2024. While the battle with inflation will be won, it will likely be a long and arduous one with central bankers’ credibility at stake.”