Down to zero | Inflation is zero

The information provided in this article was accurate at the time of publishing and should be read in the context of the date it was published. Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly.

Denis Healey and George Osborne

Denis Healey and George Osborne. Image credits Nationaal Archief and M. Holland

We’re living in interesting times.  As someone who, as a teenager in the seventies, witnessed ever-spiralling rates of inflation and interest rates to match, today’s news that inflation is zero is quite a milestone.

Barring a sizeable shock, the writing is on the wall that the economy will be in deflation within a couple of months. If this is the case, the Bank of England may find itself under increasing pressure to cut interest rates from their current all-time low of 0.5 per cent. This is great news for borrowers, but places further pressure on cash savers across the country.

The situation for cash savers has been grim for years now and the outlook is not good.  Those looking to build up long term deposits will have to scurry around to get decent rates on cash accounts.

Alternatively, for a long-term investment, now could be the time for people to consider stocks and shares, or investment ISAs.  The value of investments can go down as well as up and you may not get back the amount invested whereas savings in a deposit account are guaranteed.

This prolonged period of low inflation means that living standards will be at their highest for a decade.  It’s hardly a time for splashing out on an Aston Martin but families could be forgiven if they feel like loosening up a little on austerity.   However it’s just as good a time to put temptation to one side and use this period, however brief, of increased disposable income to invest for the future.

With the government putting more onuses on individuals to take responsibility for their children’s education, retirement and social care, the need to put money aside for the future has never been greater.

Eligibility to invest in an ISA depends on personal circumstances and tax rules may change.

No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting Advisers may charge for providing such advice and should confirm any cost beforehand.