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Peer2Peer Finance News | February 19, 2018

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Inflation stumbles in January as cost of living holds at 3 per cent

Inflation stumbles in January as cost of living holds at 3 per cent
Marc Shoffman

THERE was little relief for interest-starved savers this morning as official data showed inflation held steady at three per cent in January.

Analysts had expected the cost of living measure to drop to 2.9 per cent but it remained at the same level as December, held up by the price of recreational and cultural goods such as zoo admissions.

Inflation is also still above the Bank of England target of two per cent, which could increase pressure to raise the base rate.

“This adds further weight to the case for higher interest rates sooner rather than later,” Ben Brettell, senior economist at Hargreaves Lansdown, said.

“It seems domestically driven inflation could seamlessly take over from sterling-related rises we have seen since the Brexit vote.

“That said, structural factors like an ageing demographic and the rise of disruptive technologies continue to exert downward pressure on the inflation rate and I don’t think the Bank of England will have to be too extreme in its actions to keep a lid on the situation.”

Read more: Inflation and interest rates worry investors more than Brexit

Read more: Cash ISA savers left £4bn short by inflation

Giles Cross, chief executive of peer-to-peer business lender Folk2Folk, said savers should look for alternatives to boost their cash returns.

“High inflation continues to put strain n finances persistently holding steady at three per cent,” he said.

“Following last week’s falling share prices, today’s figures will further dampen spending ability, particularly for those who are invested in the stock market.

“Those wanting a positive return on their money in real terms will need to look at alternative avenues.”