UK Inflation hits four-year high – remember FIT & RHI are indexed linked!!


UK Inflation hits four-year high – remember FIT & RHI are indexed linked!!

Reports this week confirmed that inflation has risen to its highest rate since September 2013, jumping to 2.7%. Increased prices of clothing and electricity have been a contributing factor and also higher air fares, which were due to the later date of the Easter holidays compared to previous years. Experts are predicting that inflation could rise further in 2017 which could spark concerns for many UK households as wages continue to fall behind the rate of inflation.

What is inflation? Inflation is essentially the rate of increase in prices for goods and services. There are two main measures of inflation in the UK; Consumer Prices Index (CPI) & Retail Prices Index (RPI). Both indicators look at many items we spend our money on which range from grocery shopping to cinema tickets and even the amount it costs us to buy a pint of beer! If inflation is indicating a rate of 2.5% that means we would need to spend an extra 2.5% to buy the same thing we brought 12 months ago.

One main difference between the two indicators is RPI includes housing costs such as mortgage interest payments, whereas CPI does not. They also use different formulae, even though they use much of the same data. For instance, CPI uses takes into account when prices rise, some people will switch to products that have gone up by less. This means that CPI inflation is nearly always lower than RPI inflation.

Obviously if wages are not increasing at the same rate as inflation then the average consumer is effectively poorer than 12 months ago. In the current economic conditions of rising prices and the falling pound in the wake of Brexit wages have struggled to keep up with the rate of inflation. However most economists are predicting that inflation will dip back towards 2% next year which is more in line with the Government target.

If you are looking for an investment which will cut your bills and provide a secure income INDEXED LINKED with RPI inflation, then installing solar panels or renewable heating will offer you both of these benefits.

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