UK inflation dips to 10.1% – Financial experts react

Following the news that UK inflation has dipped to 10.1%, here is some expert commentary from personal finance markets and beyond:

 
Les Cameron, Savings Expert at M&G Wealth, said: “At times like these with inflation levels still high, and with 45% of UK adults worried about the impact according to M&G Wealth’s Retirement Revisited Report, there can be a tendency to prioritise shorter-term spending needs over longer-term financial planning.

“However, it’s important to think very carefully about stopping any financial commitments such as pension contributions, as your employer may be matching these contributions which is a valuable benefit to give up and rebuilding your pension fund to where you could have been, if you had not stopped, could be hard.

“Likewise, stopping any protection policies needs very careful consideration. That protection is there for a very good reason which has not changed with inflation and interest rates rising, and there is no guarantee that you’d get the same terms if you looked to restart any cover.

“As cash rates begin to creep up, people should shop around to secure competitive rates for their cash savings. The fundamental issue remains though, interest rates are substantially lower than inflation so getting a better rate for your cash or a better than cash return on investments will help stem the erosion of value of your money and will help to ensure your finances are more resilient against future challenges.”

 
Giles Coghlan, Chief Market Analyst, consulting for HYCM, said:
 
“Although today’s modest decline in inflation shows that CPI is slowly heading in the right direction, the strength of UK wage growth remains a key concern to Bank of England policymakers, who are likely to have at least one more interest rate hike to go.

“The latest jobs data and strong FTSE performance indicates that if workers continue to bid up wages, there is a real risk that inflation could become entrenched as companies increase prices to cover higher salary costs. Undoubtedly, this will provide ammunition to BoE policymakers who say more must be done to fight inflation. STIR markets see two further interest rate hikes to come and a terminal rate of 4.5%. However, the next hike may prove to be the last if growth starts to slow.”

Andy Mielczarek, Founder and CEO of SmartSave Bank, a Chetwood Financial company, said: 

“Inflation is heading in the right direction, but at such a slow pace that few will be celebrating. Prices are still rising at nearly 40-year highs, squeezing people’s finances and making consumers carefully consider how they can make their money work harder.

“Rising interest rates, the Bank of England’s primary weapon for combatting inflation, have at least created fresh opportunities for people who are in a position to put aside a lump sum and allow that pot to grow. What’s absolutely vital, though, is that consumers find the best option for them; this will likely be a matter for how much they are willing to put into a secure, fixed-term savings account and for how long. Further, they ought to do thorough research to find the best savings products out there, which means looking beyond the high street banks and their existing financial services providers.”
 
Andrew Megson, CEO of My Pension Expert, said:
 
“The light at the end of the tunnel might be getting a little brighter, but it would be a mistake to consider this easing as a genuine comfort to struggling Britons. Prices are still climbing at a dramatic pace, which is putting great strain on people’s finances. And those nearing retirement are among the hardest hit, with many feeling forced to abandon their plans to exit the workforce – 44% of over-55s in work now believe the cost-of-living crisis has rendered retirement impossible, My Pension Expert’s latest research revealed.

“Jeremy Hunt has indicated that the best way for over 55s to future-proof their finances is to return to work. But hard-working Britons deserve to make their own decisions about their future, without feeling pressured by the government. 

“Inflation is likely to pose challenges people’s finances for the foreseeable future. However, the those aged 55 and over needn’t assume that remaining in or returning to work is the only solution. Those concerned about their plans ought to seek help from an independent financial adviser, who will help them make informed choices and identify the best approach for their unique financial circumstances. Such support will provide a much-needed boost of confidence that retirement is within reach, despite a turbulent economic climate.”

 
Mohsin Rashid, CEO of ZIPZERO, said:
 
“Let’s not get distracted by the small dip in the rate of inflation. By any standards other than those we have become rudely accustomed to in the second half of 2022, prices are still rising at a painful level.
 
“Similarly, yesterday’s news that wages in the UK have increased more than expected was positive, but salary growth is still overshadowed by inflation. We cannot be blasé or settle for such minor and inconsequential movements. Something has to change.
 
“With soaring prices in energy and food, UK consumers are more than paying their fair share. After months of high inflation, personal finances are close to breaking point, household budgets have little room left for manoeuvre, and essential items are having to be sacrificed. Businesses, especially energy companies and retailers, must search for new ways to support consumers or expect louder cries for windfall and price-capping measures.”
 
Commenting on the decline in UK CPI Andrew Aldridge, Partner at Deepbridge Capital, said:
 
“Today’s inflation figure of 10.1% for January—paired with last week’s better-than-expected GDP figures—is a promising sign for the UK economy, signalling that it is on the road to recovery. With inflation expected to continue falling this quarter and fiscal policymakers working hard to restore confidence in the public markets, Government initiatives such as the Enterprise Investment Scheme have never been more important for entrepreneurs, investors and financial advisers alike; supporting home-grown, high-growth and innovative business.“