Recent economic forecasts have painted a gloomier picture than most, predicting inflation to pass 11% later this year and reach bleak heights of 13% by the start of 2023. With the cost-of-living crisis deepening, the Bank of England has decided it’s time to get forceful, increasing the rate by 0.5% in today’s Monetary Policy Meeting.
The move takes the base rate to 1.75% and marks the largest single hike for over 25 years as the bank struggles in the economic storm. Further increases are believed to follow this year with some saying a 3% peak is required to beat inflation. Many people today will not have experienced interest rates at this level in their adult lifetime.
Policymakers locked in the bolder rate rise amid growing recession pressures. Analysis released by the National Institute of Economic and Social Research (NIESR) this week warned that the UK is sliding into a recession, blaming both the government and Bank of England for allowing high inflation to cripple millions of households and businesses. Research has also pointed to worsening regional and household income disparities.
The bad news is there is no hiding from surging prices – but there are ways to soften the blow. In periods of economic stress, planning, budgeting, and keeping on top of your money can boost healthy financial wellbeing.
Protect what you have. It may be a good time to assess how much risk you can take on when it comes to your investments. Do you need more liquidity as an emergency stash? If this is the case, keeping more in savings could help provide peace of mind. Almost three quarters (74%) of regular savers are much more likely to be happy compared to 36% of non-savers, according to a Lloyds Bank Savings Report.
Grow what you can. If your money has been sitting in zero-to-low-paying bank accounts for months, it’s likely that you are missing out on much greater returns. With interest rates on the rise, growing your savings is one way to mitigate the effects of inflation. Actively switching to the top rates when they crop up ensures your savings are working as hard as they can be.
Flagstone can help you manage and grow your savings, so you feel more financially secure. Speak to us today if you’d like to find out more about our savings platform.