Don’t discount inflation

Post by Mearns & Company in News

Despite slowing down considerably, inflation has not gone away yet.

The fact that annual price rises have dropped to under half their October 2022 11.1% peak does not mean you can now ignore inflation’s impact. As some of those who grew up in the 2010 –2020 era of low inflation are now realising, a falling inflation rate (disinflation) is not the same as a general falling in prices (deflation). Prices are still rising, albeit at a slower rate.

In the three years since the start of 2021, inflation added over a fifth to average prices, only 2.2% less than the increase across the entire decade from 2010. You could now need to review your financial plans if they are more than a couple of years old. The level of life and health cover that looked more than adequate in 2020 may no longer be enough. Similarly, the pension pot that looked sufficient for a comfortable retirement may now be at the just-getting-by level.

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