16th September 2021
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- Inflation spikes at record rate
- City watchdog teams up with influencers
Inflation spikes at record rate
What’s going on?
Inflation, as measured by the consumer price index (CPI), jumped by 3.2% in the 12 months to August, from 2% in July. It’s the largest ever month-on-month increase since monthly records began in in 1997.
A steep rise in the price of transport, eating out and used cars were the main culprits.
Why is this important?
Remember the summer of 2020? The government subsidised restaurant meals (up to £10) between Monday and Wednesday with the Eat Out to Help Out (EOHO) scheme. The Office of National Statistics thinks that because EOHO was only in August last year, the upward shift in the August 2021 12-month inflation rate is likely to be temporary.
The cost of used cars rose 18% from a year ago and fuel costs made a big contribution to higher transport costs. Housing and household services also rose sharply, reflecting higher rent costs.
CPI is now above the Bank of England’s target of 2%, it had said earlier in the year that it expects inflation to reach 4% before the end of 2021 before falling in 2022. Though it could still face added pressure to take action sooner to cool prices.
The lifting of Covid restrictions has led to an increase in consumer demand for goods and services but the supply side has struggled to keep up with many firms reporting shortages in workers and materials. This has created the perfect storm for rising prices which is usually quelled by tighter central bank policies i.e. rising interest rates.
But the Bank of England have been quick to call out any inflation spikes as “transitory” and believe it will settle once supply chains and consumer behaviour returns to normal.
The cut to universal credit, public sector pay freezes, the end of the furlough scheme and now rising prices will mean extra pressure for many household finances.
Inflation could still rise further as energy bills are set for a sharp increase this winter as wholesale gas and electricity costs soar to record levels.
City watchdog teams up with influencers
If you have spent long enough on social media you will have no doubt seen content on how to invest in assets like cryptocurrency and foreign exchange to get rich quickly.
Given the young audiences on these platforms there’s a huge risk that inexperienced people could be taken advantage of and lose their money.
That’s why the financial regulator, the FCA, has stepped in to protect consumers from dodgy investment advertising. It’s signing up influencers in a campaign to warn people about the downsides of high-risk investments.
Celebrities like Kim Kardashian have been criticised for their part in promoting trading apps which have proved popular among young people drawn into investing.
A survey by investment platform Interactive Investor found that 45% of young investors aged 18 to 29 said their first ever investment was in cryptocurrency, while many were funding this through a mix of credit cards, student loans, and other loans.
The FCA wants to enable consumers to make effective investment decisions by using a £11m awareness campaign to reach wannabe risk-takers.
The regulator also states that nearly 9m people currently hold more than £10,000 of investible assets in cash. Given that interest rates are at record lows, the FCA wants to encourage people to invest who are currently missing out on better returns.
Stat of the day
Facebook research found that 32% of teenage girls surveyed said when they felt bad about their bodies, Instagram made them feel worse
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