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Inflation raging at 5.1% as Bank of England reduced to near powerless onlooker

Inflation raging at 5.1%

Let’s not beat around the bush. The Bank of England has got some serious egg on its face after today’s shock rise in inflation to 5.1%.

The cerebral experts on the Monetary Policy Committee were expecting CPI to peak at around 5% in the Spring of next year. Sadly the economy had other plans. The pandemic has ripped up the economic rulebook.

More than an hour after the Office for National Statistics published the latest inflation data, the Bank of England still hadn’t updated the figure on its website. That kind of says it all in terms of the Bank being behind the curve.

For savers and investors alike, inflation is now a serious, no, an existential threat. Britain’s battle-scarred savers are in about the bleakest position possible, and that’s saying something after a near 14-year low interest rate environment.

Anyone wanting to stay on top of inflation will need to give up the certainty of cash deposits and move into investing. The only certainty of cash deposits in the current climate is the certainty that you’ll be losing money in real terms.

As ever, anyone moving from cash into the world of investing for the first time should do their homework or speak to an IFA to guide them in a risk-controlled manner.

In theory, the Bank of England would raise interest rates tomorrow, which would be at least some good news for savers, but the reality is that’s unlikely to happen. The markets are now expecting a hold, and they’re almost certainly set to be proved right.

With the Omicron variant threatening another potential lockdown, the stakes are simply too high and raising interest rates now could destroy what little sentiment is left.

Inflation is raging at a decade high but the Bank of England, which ostensibly manages the economy, has effectively been reduced to a helpless onlooker, its hands tied.

The festive spirit has just been dampened, and quite considerably so.

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