WE continue to live – and work – through truly exceptional and unprecedented times.

When the UK’s inflation figures for March were released last month, they showed that inflation had risen to 7%.

This is the highest rate for 30 years.

Across the Atlantic, the figures were even worse, as US inflation reached 8.5% – the highest since March 1981.

The reason for this is widely attributed to the simple fact that the Ukraine war has pushed up energy prices.

In the US, it is almost certain that the Federal Reserve will increase interest rates by 0.5% this month, and a report from American multinational investment bank JP Morgan suggested that rates here in the UK could rise a further four times this year.

In his Spring Statement delivered on March 23, Chancellor Rishi Sunak said he expected inflation to average 7.4% this year.

But at the time, no-one was really expecting the war in Ukraine to last into next year – as many military experts are now predicting.

The war – along with the continuing problems in the global supply chain – is expected to continue pushing up the price of both fuel and food.

Traditionally, the Bank of England has used interest rates to control inflation.

At the moment, the bank base rate is 1%, and if JP Morgan’s prediction is accurate, we could well see base rates in the region of 1.75% to 2% by the end of the year.

Some forecasters are even suggesting that inflation could rise above 10% in 2022.

Will a rate rise be enough to curb inflation?

Higher interest rates will certainly mean higher mortgage rates and more interest to pay on credit cards and should start to curb inflation.

However, the war in Ukraine – traditionally known as ‘the bread basket of Europe’ – presents a once-in-a-generation set of circumstances as Russian forces continue to blockade ports and prevent grain exports.

The World Bank has spoken of a ‘human catastrophe’, forecasting a 37% jump in food prices this year.

The BBC said that the war will cause ‘the biggest commodity price shock’ since the 1970s.

So, whether we see three, four or five rises in base rates may be immaterial as far as inflation is concerned.

People will unquestionably have less money to spend.

But they have to buy food – and, of course, the energy price cap is set to rise again in October, adding another twist to the inflationary spiral.

For those clients of Future Life Wealth Management who are savers, rising interest rates should be good news… But the rates paid on savings accounts are firmly expected to remain at historically low levels.

My message at this point is simple.

We are here to support you through these unprecedented times.

If you have any questions on how world events or how the Bank of England’s latest decision on interest rates will affect your savings and investments, please do not hesitate to contact us HERE.