Conservatives conquered inflation rates but the battle for families isn’t over

The ONS have announced inflation has dropped to 4.6%, which, on the surface seems like exceptional news, but experts have warned finances will remain tough for months to come. 

This morning, the Office of National Statistics (ONS) revealed that inflation levels dropped to 4.6% in October, confirming that Prime Minister Rishi Sunak has met his pledge to halve inflation by the end of the year early.

Although this news seems overtly positive, dissected it becomes apparent that struggling households are not yet out of the woods.

Since the cost-of-living crisis began, the Bank of England have been at the heart, trying to regain control over inflation figures. Since December 2021 the organisation have increased interest rates 14 times and have only recently held them at 5.25%.

As a result, 42% of people in the UK have been finding it difficult to afford their mortgage payments and the costs of houses have risen to their highest point since 2008, according to the ONS.

Now that the rate of inflation has reached its lowest point in two years, questions have begun circling about whether the Bank will start to lower interest rates. However, experts have said they don’t think rates will fall to 4.75% until late summer next year.

Richard Garland, chief investment strategist at Omnis Investments said: ‘This is a large fall in the headline CPI, but was widely anticipated due to year-on-year effects and falling energy prices; nevertheless, it is good news which confirms the downward trend in inflation. It is likely to mean that the Bank is in a good position to begin cutting rates in late 2024, but much depends on the strength of the labour market and the economy. The bank is likely to want to see further weaknesses emerging before indicating how long policy will remain restrictive.’

As well as highlighting how households may continue to struggle with inflated costs, due to the Bank of England not quickly reducing interest rates, Peter Matejic, chief analyst at the Joseph Rowntree Foundation (JRF), has also outlined that since the ONS announced inflation rates have dropped, people seem to have forgotten the tragic effects they had on low-income families.

‘The people who had to take on debt in order to eat, or the people who took something they cherished to a pawnbroker just to buy warm clothes for their children, are not feeling the financial security Rishi Sunak promises,’ Peter said. ‘They live in a world where their income, in many cases, simply doesn’t cover costs while the Government talks about cutting their support further.’

Peter added: ‘Ministers claim that getting inflation down will make everyone’s money go further but, even after this fall, prices are still far higher than they were last year, rising at more than twice the Bank of England’s target rate. People are still having to go to great lengths just to afford everyday essentials and often are going without. 

‘It’s indefensible that the government is reportedly considering cutting the benefits of struggling families worried for their future, with news stories suggesting it plans to use today’s figures, instead of last month’s, to fiddle the figures and hide a big cut.’

The news of inflation rates coming down has come a week before chancellor Jeremy Hunt is set to deliver his autumn statement. On 22^nd November, Peter has said the chancellor should focus on increasing benefits in line with inflation levels and ‘Local Housing Allowance must be unfrozen to support private renters with their housing costs.’

Peter also said: ‘The chancellor should also take steps to ensure that Universal Credit, at a minimum, always enables people to afford the essentials.’

Image: JordanHoliday

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Small steps forward: UK inflation rate drastically drops to 6.8%