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Published on January 18th, 2011 | by Pete

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Inflation and VAT Increases

In December 2010, inflation hit 3.7%, an increase of 0.4% from November 2010. In addition, the Consumer Prices Index (CPI) which incorporates mortgage interest payments, rose from 4.7% to 4.8%.  So, what is the fallout of this? Well, one thing it will do is put more pressure on the Bank of England to lift interest rates, which may well restrain mounting inflation.

Unfortunately, the recent VAT increase to 20% has the potential to add to fuel inflation, which are now growing at their fastest annual rate since July, and there is also the added pressure of increasing food prices, which are demonstrating their fastest annual rise since May 2009.

None of this is particularly good news I’m afraid, but I’m not here to lie to you, or to patronise you. For me, it again highlights the importance of sticking to a strict budget. Is there anything regularly sneaking into your trolley at the supermarket that you probably don’t actually need? Go on, give it some thought.

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