Inflation has been slowly creeping up towards the Bank of England’s 2% target. Up from 1.2% in November, it reached 1.6% at the end of December – the highest it has been since the summer of 2014.
The increase is attributed to rising air fares and food prices, as well as higher costs of imported materials and fuels. Whilst still below the 2% target and still historically low, its rise certainly seems to be gaining momentum. With the increasing costs of production caused by the weakening pound starting to be passed on to consumers, we are likely to see further rises in inflation in the future, affecting our day-to-day spending, mortgages and savings.
If inflation continues to rise, the Bank of England are likely to look again at their policy of low interest rates. As yet, nothing has been announced so there is no cause for panic. We will keep an eye on progress but, at the moment, we are still in a period of exceptionally low inflation.