British Prices Jump Fast

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What's going on?

Swoosh….prices in Britain rose in February at their fastest pace since 2013 (i.e. inflation increased)! This has already made an impact on the market and will leave a dent in your wallet!

What does this mean?

The 2.3% increase in consumer prices (e.g. the cost of going to the movies) versus a year ago was higher than economists were expecting and exceeds the Bank of Englands (BoE) target of 2% (Why a 2% target? Click here). By comparison, inflation was 0.3% at this time last year.


The big fall in the value of the pound in the aftermath of Junes Brexit vote has a lot to do with the increase: as the pound loses value, it costs more (in pound terms) to import goods and services which thereby drives up prices (imported services include things like Salesforce software and foreign holidays).

Why should I care?

For the markets: The pound increased in value.

Some investors think that the BoE will raise its target interest rate in an effort to dampen inflation. Remember, higher interest rates make it more expensive for people to borrow, and thus spend, money and less demand for things means less pressure on prices moving up. Higher interest rates would make the pound more attractive to international investors (Why? Click here) which, in turn, was likely behind the pound jumping almost 1% versus other major currencies on Tuesday.


For you personally: Slowing economic growth and rising inflation arent nice but it might be temporary.

Life could be getting more expensive if your wage isnt growing, at least, at the same rate that prices are increasing. The question, as always, is how long this will last. If the pound does not fall significantly further versus other major currencies like the euro and the dollar, then inflation should begin to ease meaning the effect could be relatively short-lived. So keep an eye on the value of the pound for a sense of how much your costs change over the coming months/years.

Originally posted as part of the Finimize daily email.

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