UK inflation data shows CPI grew by 10.5 per cent in the year to December 2022 from 10.7 per cent in November.
The rate was just less than the 10.6 per cent predicted by analysts. According to the data, each household in the UK must find an additional £2,629 per year to maintain their standard of life.
Abrdn strategic director Jonny Black says: “Stubbornly high inflation will drive demand for advice from new and existing customers this year.
“People, at all life stages, are needing support navigating what is a highly uncertain and fast-changing environment. Once again, the sector has a huge opportunity to demonstrate its value by helping people keep working towards their long-term financial goals, and not get blown off track by this storm of financial headwinds.
“Inflation isn’t just a customer issue. Firms themselves will be grappling with a higher cost of doing business. Advisers and management teams will already be well underway with their 2023 growth plans. If they haven’t already, considering everything they can do to help mitigate overhead cost rises – for example, by driving efficiencies through platform technology – will be essential for their ongoing resilience, and their continued success.”
Canada Life technical director Andrew Tully says: “Today’s numbers will offer little by way of comfort. While inflation may be ‘cooling’ from the peak of last year, we will see prices for everyday goods and services continue to rise, just not quite as quickly as we saw in 2022.
“It really is crunch time as pay deals are negotiated across public and private sectors, with economic forecasts predicting a deep and protracted fall in our living standards. The Bank of England predicts inflation will fall sharply from the middle of the year, but not approach the 2 per cent target for a further two years. However, the large price rises we have seen over the last year are locked in, and it will likely take a number of years of pay rises before people start to feel they have the same disposable income as previously.“For people on fixed incomes, especially those drawing on their pensions in retirement, a double-digit rise in state pension from April will offer little light at the end of the winter months.”
Standard Life managing director for customer savings and investments Jenny Holt says: “Inflation isn’t going away quickly, running to double-digits for the fourth consecutive month, and with the cost-of-living crisis entering a second year the impact on household savings has started to kick in, in earnest.
“Even if, as forecast, inflation subsides gradually through the year and annual inflation for 2023 comes in around 7 per cent- well below the current level- £10,000 saved in a best buy easy-access cash-based savings account today, earning 3 per cent interest, would be worth around £9,580 in real terms by next January.”
IG Group chief market analyst Chris Beauchamp says: “A second monthly slowing of inflation pressures seems to point the way to the BoE bringing its hiking programme to a halt in the months to come, cutting back to 50bps in Feb and then 25bps in March, and then sitting back to let higher rates do their thing. This will be little comfort to UK consumers, but at least one part of the squeeze will abate for the time being.”
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