Inflation falls, but uncertainty will persist for households

Kevin Brown saving specialist at Scottish Friendly comments on today’s inflation update from the ONS:

The fall in the inflation figures from the ONS come as something of a surprise, in what continues to be a very uncertain situation. The problem for households is that even if inflation is showing signs of slowing, they are unable to make confident personal financial decisions without knowing what is coming down the tracks until something approaching the status quo returns.

The energy bill freeze will begin to help to alleviate some of the uncertainty, but this level is still well above where we were just 12 months ago.

What is clear from yesterday’s wage data compared with the latest inflation figures is that workers are getting real term pay cuts of 4.4%. This is even worse for public sector workers where pay rises are still stubbornly low at around 2% - a net pay cut of 7.9% - a clearly unsustainable level.

For households wondering what they should do now, what is really important is to try to build up financial resilience wherever they can – a rainy day fund can be an essential way to protecting monthly budgets against unexpected costs. Longer-term saving and investing for the future might seem tricky too, and we understand how difficult this is for many during this time, however it remains an essential activity for households to undertake where possible.