Inflation reaches 9.1%: Industry Experts Comment

Household Finances
Connor Campbell at NerdWallet said: “A further spike in inflation was expected – but this will offer little comfort to struggling households, particularly as wages aren’t keeping up. Indeed, recent research from NerdWallet found that almost half (46%) of UK SMEs have not raised employee wages in line with inflation, suggesting that the financial strain will persist for some time.
 
“Clearly, the government must go beyond one-off financial support and develop a long-term economic recovery plan to help the UK emerge from its current economic predicament. Not all households, however, can afford to wait for such measures to be announced.
 
“Certain steps can be taken if you are seeking assistance. Free support is available in the form of debt charities StepChange and Citizen’s Advice, if you want to air your concerns or take steps to develop a financial recovery plan, while the Trussell Trust has a postcode tool that can allow you to find a food bank in your area. Price comparison sites could also offer some solutions, by allowing households to compare prices for a variety of necessities, from groceries to energy providers. 
 
“There is no quick fix to the cost-of-living crisis. However, Britons should know that  there are tools available to provide some short-term relief. And such action could set them on the right track towards regaining some control over their finances.”

Investors
Jatin Ondhia, CEO of FCA-regulated investment platform Shojin: “Prices are rising faster than they have for four decades and while May’s CPI figures represent little change from last month’s record hike, the tide remains strong and is set to continue rising, which could push inflation into double figures towards the end of the year.

“The combination of sustained and high inflationary pressure with sharp rate rises and generally tighter monetary policy constitutes a radically different macroeconomic environment, posing a serious threat to investment returns and consumers’ finances. As the global economic outlook darkens, investors must take the time to reassess their inflation toolbox and consider which assets are likely to help cushion their portfolios against further hikes. Maintaining a well-diversified portfolio and ensuring investments remain aligned with long-term goals will be key in navigating the challenges and it should be expected that the defensive and income yielding capabilities of resilient assets, such as real estate, will stand out ever more sharply against the current economic climate.”

Retailer Support for Consumers
Mohsin Rashid, co-founder of ZIPZERO, said: “Consumers are being battered on all sides. If you delve beyond today’s data about the eyewatering rate of inflation, the figures make for ugly reading: annual spending on food is expected to rise £380 this year, while energy bills are on track to pass £3,000 for the first time ever.

“Savvy financial management is important, yes. But to think consumers can work their way through such a challenging economic climate on their own is foolish. Businesses must do more – namely, retailers and energy providers.

“Positively, there’s a solution. Each year, retailers and brands spend a whopping £27 billion on digital marketing. This money could be redirected back to consumers in the form of cash rewards from their everyday shopping, helping them to pay their spiralling energy bills.

“This can only work if retailers and energy providers operate together on the same platform. Retailers can engage directly with shoppers, offering cash rewards from purchases; these cash rewards can then be used by shoppers to pay their energy bills. We are calling on retailers and energy providers to join ZIPZERO (and the major household names already with us) in our mission to tackle the cost-of-living crisis through a practical, long-term and mass-market solution.”

International Markets
Giles Coghlan, Chief Analyst, HYCM said: “If today’s CPI print tells us one thing, it is that the UK’s economic outlook looks very bleak indeed. With forecasts suggesting that GDP will head into negative territory for 2023, the Bank of England has an impossible task on its hands. Ultimately, policymakers have very little choice other than to hike interest rates to bring down inflation. Without adequate quantitative tightening, the Monetary Policy Committee risks inflation spiralling wildly out of control and causing a wage-price spiral, which would be disastrous for the economy.

“As today’s inflation data came in just a fraction below the market’s maximum expectations of 9.3% year-on-year, traders and investors should therefore watch for yet more aggressive action from the Monetary Policy Committee in August. Predictions are currently suggesting that inflation could top 11% this year – this, combined with the Ofgem cap rise due in October, means that the risk of a recession is looking more and more probable by the moment. Before the release of the inflation print, the short-term interest rate (STIR) markets were pricing in a 86% chance of a 50bps rate hike for the central bank’s August 04 meeting, so investors will no doubt be awaiting a hawkish response from the BoE.”