Prior to the announcement of Liz Truss’s new energy policy (which is set to come into play from October 1st), the average household energy bill was expected to increase by 82% at the beginning of the autumn. However, the decision to freeze the energy price cap at £2,500 per annum, all UK households have seen their financial prospects improve in the short-term, with those on variable tariffs expected to see their bills rise no more than 27% in total.
This will have a significant impact on inflation in the UK, with Truss’s teams arguing that the new policy could shave 5 percentage points of headline prices. But what’s the new state of play regarding inflation, and how can you safeguard your family from its worst affects.
Then and Now – The Outlook for Inflation
Inflation began to rise steadily at the end of 2021 against the backdrop of various supply chain issues, but Russia’s invasion of Ukraine in February restricted the supply of oil and energy on a global scale. This occurred as demand was soaring, creating a scenario where prices peaked and inflation began to grow out of control. Incredibly, inflation hit a 40-year high of 10.1% in July, while the prospect of additional energy price hikes in October and January was projected to trigger a further hike to 18.6% in the New Year.
However, inflation dropped a couple of points to 9.9% in August, as it became clear that oil and wholesale gas prices weren’t rising quite as high as first thought. Similarly, the Bank of England (BoE) has revised its forecast in the wake of the new energy policy, suggesting that inflation was moving beyond 13% and may have already peaked early in the summer.
How to Cope with Inflation and Protect your Income
While the economic portents may have improved for now, it should be noted that inflation remains close to double figures in the UK. At the same time, there remain concerns about the wider economic impact of Truss’s economic policies and how they’re going to be funded, which will also weigh heavily on inflation and the cost of essential items such as food and drink. But how can you cope with high rates of inflation and optimise the value of your income? Well, one of the best options is to create additional income streams, ideally those that are passive in nature and capable of being integrated into your existing schedule.
For example, leveraging speculative investment vehicles like forex can deliver returns without requiring you to assume ownership of the underlying assets, creating far greater opportunity regardless of the wider economic climate. You may also note that savings rates are rising in the UK, as the BoE continues to hike the base rate as a way of naturally combatting inflation (these two macroeconomic factors have an inverse relationship).
This may afford you the chance to identify savings accounts with significantly higher yields. This provides a risk-free store of wealth and enables you to accumulate wealth consistently, although it’s important to seek out savings rates that are capable of beating inflation over time.
Ayesha completed her Doctor of Philosophy in Biochemistry and started her career as a College Lecturer in 2013. Today, she’s a happy mom of 2 Kids in the field of digital marketing. She loves reading books, spending time with her family, and making delicious food for her husband.