Dean Butler, Managing Director for Retail Direct at Standard Life, part of Phoenix Group, said: “August inflation data highlights the sustained nature of UK price pressure, with CPI remaining at 3.8%. Food costs look to have been a driver along with restaurant and hotel costs. These figures come in the context of a finely balanced Bank of England MPC decision to cut interest rates in August. This only squeaked through after a second round of voting – and with inflation climbing higher, a further cut when they meet again this week looks very unlikely. For borrowers, this could mean costs stay elevated for longer, particularly for mortgage holders and those with other forms of debt. Savers, meanwhile, may still find some best-buy easy-access accounts offering inflation-beating rates, though real gains remain slim once rising prices are considered. For those able to accept some investment risk, options like a stocks and shares ISA or, looking longer-term, a pension could offer better prospects of growth above inflation. Next month’s inflation release will be particularly significant as it sets the inflation element of the State Pension triple lock. However, with average earnings growth currently sitting at 4.7%, it looks likely this will be the figure that determines next year’s rise. If so, that would mean a full new state pension increase of around £562 to £12,534.60 for the tax year 2026-2027.”
David Brooks, Head of Policy at Broadstone, said: “Although inflation remains stubbornly high in the UK, it looks likely that the average earnings figure will this year trigger another substantial triple-lock increase next April, taking the full new State Pension right to the brink of the Personal Allowance. The good news for millions of pensioners is that they will receive an above-inflation hike to their State Pension at a time when the cost of living continues to squeeze retirement incomes. For those that rely heavily on the State Pension to provide the majority of their income, the extra +£560 a year will be a welcome financial boost especially alongside the widening of Winter Fuel Payment eligibility.”
George Lagarias, Chief Economist at Forvis Mazars said: Although inflation eased a bit by some metrics, we are still far from comfortable. Restaurants, hotels and motor fuel costs continue to rise substantially, and were really offset only by cheaper airfares. The numbers today may justify the Bank of England’s caution against slashing interest rates, but this is of little comfort to consumers, who have been experiencing stagflationary pressures for over a year. Businesses, especially in the services sector, are still trying to pass increased labour costs to consumers. We continue to believe that lower growth will eventually win out and supress prices eventually, but patience will be required.
Nicholas Hyett, Investment Manager, Wealth Club: "Overall inflation is stuck at nearly twice the Bank of England's target rate. For poorer consumers the effective rate is probably higher still, since food accounts for a larger proportion of their total spending and food prices have risen 5.1% year-on-year. Stubbornly high inflation means it's unlikely that the Bank of England can bail out the economy with cuts. That is doubly bad news for the government, which desperately needs either growth to pick up or rates to come down in order to free up some financial headroom. The problem is that the current inflationary spike seems to be a uniquely British problem. UK inflation is now appreciably higher than rates we see in European peers or the US, and a lot of that is probably down to own goals on the government's part. Things like food retail and hospitality employ large numbers of comparatively lowly paid staff, where simultaneous increases to employers' national insurance and the national living wage have substantially increased costs and led to a corresponding increase in prices. Big increases to public sector pay are also still feeding through sectors like education and healthcare. Over time those effects will fade. But until they do, inflation is going to remain a source of pain for the government and the public at large."
|
