You may think things are bad in the UK at the moment, but, it’s going to get a lot worse in the coming six months. Inflation today is 10.1% measured by the Consumer Price Index (CPI) and 12.3% measured by the Retail Price Index (RPI). In October, energy prices will rise by 86% and unit prices will be around 50p for a KWh of electricity and 12p for a KWh of gas. That’s going to increase the inflation rate, and, we’re getting another 20% increase on the energy price cap in January 2023. We’ve had some food inflation in the UK, but none of the price increases reflects the current decreases in yields around the world this harvest time, so expect more big price increases in the Supermarkets over the next six months.
The Bank of England is increasing interest rates and the last increase, 0.5%, was the biggest single upswing for years. The next review will be in October and it’s expected that another 0.5% increase will take the interest rate to 2.25%. It’s been suggested that the target rate for the Bank of England is 4%, so we still have a way to go. For those on variable mortgage rates, they can expect their mortgages to rise accordingly. The current energy price increases are down to the wholesale price of gas caused by shortages due to fossil fuel energy companies not increasing supply after the Covid Lockdowns and, of course, Gazprom’s choking of supply to Europe, with supplies being 80% down on this time last year. These supply and demand issues are not expected to end anytime soon, and the next two years energy supplies have already been bought so prices will remain high for the forseeable future.