Bank of England forecasts increased inflation rise

The Bank of England published its Inflation Report in May, revising its forecast to a higher figure than three months ago.

Governor Mark Carney, at a press conference to announce the report, said that inflation was now forecast to be 2.8% in 2017. In February, the bank’s forecast was an inflation rate of 2.4%. Carney put the increased figure down to the weak pound following the vote to leave the European Union held last year.

The Bank forecasts that wages will grow by 2% in 2017, which is 0.8% below the inflation rate, and believes that by 2019, wages should rise by 3.75%. It is aiming to keep inflation to 2% or less, which will mean that wages should rise above the level of inflation within the next two years.

The Bank of England base interest rate remains at 0.25%. Many banks are paying interest rates of less than 2%, which means that in real terms, money sitting in a high street bank savings account can be losing value. Workers who receive wage increases below inflation and have their money saved in a standard savings account are worse off than last year, leading Trade Union Congress (TUC) General Secretary Frances O’Grady to call for parties to make wages an election priority.

The Bank of England’s report highlights the need to have a wealth management plan to maximise financial growth. At Endeavour Financial Planning, we can create a plan that aims to grow your wealth so that it beats the impact of inflation.