As per the latest figures released, the inflation for the UK inched up to 4.4% in July compared to 4.2% in June. The trend is definitely in line with the prediction of the Bank of Englandís forecasts which said that the inflation is likely to hit 5% by end of this year.
This did not come as a surprise to the analysts as many economists were predicting the inflation to reach 4.3% in July which is more than twice the Bank of Englandís target rate of 2%.
Inflation in Britain ticked up slightly more than expected in July, with consumer prices rising 4.4pc compared to a 4.2pc increase in June, taking inflation closer to the Bank of England's forecast of 5pc by the end of the year.
The main reason for the inflation has been attributed to rising financial fees and the prices of clothing and footwear falling by less than what it did the same time last year. As per the Office of National Statistics (ONS), this has certainly pushed up the cost of living. The ONS also reported that the Retail Price Index remained steady at 5%. The difference being RPI includes the costs of mortgage interests. Many businesses including the rail companies use RPI indexed pricing set at RPI plus 3%. This means if the RPI remains at these levels, commuters will once again be hit by another price increase to the tune of 8%. The increase in transport costs will lead to other costs such increased costs of fuels and food costs which will lead to a price fuelled spiral.
The Bank of England is adamant that any increase in base costs will put the recovery at risk and the inflation is questioning the basis of any recovery.
Many small to medium businesses have been receiving the wrath of inflationary pressures by way of increased costs. This is leading to further cost cutting exercises. While some people costs can be managed by keeping the incomes static and not allowing any salary rises, redundancies are unfortunately not going to reduce.
Income protection insurance is increasingly becoming more relevant and with the government's continued austerity on benefit payments, people have to find their own way of protecting their incomes. One of the benefits of income protection is that when someone is made redundant, they donít have to panic and rush to get into work. The income protection is a bit of a breather and allows people who have been made redundant to apply for jobs that they would prefer to do and the space and comfort to carrying on looking for jobs without worrying about the next pay cheque.
Income protection insurance is also increasingly used by people who have mortgages as they realise that just covering for mortgage would only solve some of the financial obligations they have to meet. There is more to life than just mortgages and increasingly people are buying income protection insurance to top-up their requirements.
Stuart Boseley Director of Best Insurance commented that inflation and interest rates are intricately linked and there are no short cuts. It is becoming increasingly certain that the economy may go for another round of recession. The risk of France, Spain and Greece defaulting is increasing by the day and we are in for some challenging times.
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