Interest rate warning as inflation increase is ‘coming for your savings’ – act now

Inflation forecast: Expert discusses rise

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Interest rates may be impacted as it was announced today inflation rose to 2.5 percent in the 12 months to June. Interest rates tumbled as a result of the COVID-19 crisis, and the Bank of England’s decision to lower its base rate to 0.1 percent. While the central bank’s base rate has remained the same ever since something which isn’t remaining so static is inflation.

Inflation is the rate at which prices are rising, but it is also a decrease in the purchasing power of money.

A rise in inflation could mean Britons feel the pinch as the cost of goods and services increases.

But one of the key implications of an inflation rise visits itself upon savings – and could have implications for how money can grow.

Data released this morning by the Office for National Statistics showed inflation rose 2.5 percent in the 12 months to June, up from 2.1 percent in May. 

Just one week ago, the Bank of England’s outgoing chief economist, Andy Haldane, suggested inflation could be set to rise to up to four percent.

This would be a staggering increase and could be palpably felt by Britons.

Jason Hollands, Managing Director of Bestinvest, commented on the recent news.

While he acknowledged many people may have built up a financial buffer in recent months, there was still concern about the rising rate of inflation. 

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He said: “Rising inflation now risks eating into improved finances, gnawing away at the future spending power of cash left languishing in savings accounts at a time of ultra-low interest rates.

“Don’t be fooled by small rises in cash savings rates: real interest rates on cash savings are negative, once inflation is taken into account.

“It is very wise to have some cash set aside for short-term needs and unforeseen emergencies.

“But holding too much wealth in cash for prolonged periods when the bogeyman of higher inflation is stalking the earth is a sure way to get worse off in real terms.”

More to follow…

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