The UK inflation rate figures came out this week (11 April) and they show that inflation stayed at 2.3% for March 2017. This means that inflation stayed steady – it didn’t grow or fall.
With the Bank of England’s current inflation target at 2%, this means that inflation is currently where it should be. But will it keep going up? And what does this actually mean for the money in your pocket? We’ll take you through all the facts.
Why has UK inflation stayed at 2.3%?
UK inflation has remained steady for this month because certain things rose in price while other things got cheaper. This means that it balanced out and the rate stayed at 2.3%. This is according to the Consumer Prices Index (CPI) – one way of measuring UK inflation rates.
The main factor pushing up inflation is the rising cost of food and alcoholic drinks. These rose by 0.4% compared to February 2017.
And one of the biggest reasons that inflation stayed steady was down to falling air fares. Compared to March 2016, March 2017 saw flight prices fall by 4%.
This isn’t actually because flights are getting cheaper though. In 2016, Easter was in March so the high demand meant we saw higher prices. As Easter falls in April in 2017, we’ll probably see an increase in air fares over the next few weeks.
So when the April 2017 UK inflation stats come out, they could well show a rise.
What does this mean for your finances?
You might think that inflation stats are just something for economists and businesspeople to pay attention to. But CPI inflation actually tracks the price of some of the most popular products in the country.
This means that if CPI inflation is high, it’s likely you’ll be seeing higher prices in shops too. This could mean you’ll be worse off, as you may have to pay more for your groceries and other goods.
Inflation is still around the Bank of England target so it’s likely that you don’t need to worry about the rate just yet. But some experts think that UK inflation rates could hit 3% in 2017, and possibly even go higher than this.
If inflation keeps increasing, the Bank of England might consider increasing interest rates. The base rate is currently set at a historic low of 0.25% and it’s not been above 0.5% since before March 2009 – find out how things were different back in 2009.
A rise in interest rates could affect you if you borrow money on a variable tracker rate. This is where the interest rate you pay ‘tracks’ the Bank of England’s base rate. This is how some mortgages work.
It could also mean that it might work out more expensive to borrow if you’re looking to take out more credit. So if you’re looking to take out a loan or a credit card, you might find that rates aren’t quite as competitive on these if interest rates increase.