Inflation Commentary July 2022

Kevin Brown, savings specialist at Scottish Friendly, comments:

Month in, month out inflation continues to rise and the real worry for households is not knowing how high it may go.

The latest forecast from the Monetary Policy Committee is that inflation will reach 11% in October when energy prices are expected to spike once more.

Managing these increases is becoming harder and harder for families, as incomes are squeezed more tightly. When factoring in inflation, wages excluding bonuses fell by a record 2.8% over the past year, and households could see their take home pay drop further in the coming months.

During this time, interest rates could also rise significantly with expectations that they will reach 2% by 2023. It will mean higher mortgage payments and increased borrowing costs, which are going to be hard to swallow for households already struggling to make ends meet.

Savers may benefit eventually but a lot of people are struggling to find spare cash at the moment and with the gap between interest rates and inflation at its highest for 50 years, people’s long-term wealth is also depreciating.