New Year Blog 2022

30 December 2021

2022 is ahead of us, and we hope that you were able to enjoy some of the celebrations at the end of 2021. Many are hoping and planning for a less restricted year ahead.

Looking forward, what do we think is in store for most of the UK and perhaps further afield?

Inflation is anticipated to continue rising over 2022, perhaps continuing above 5% or so (CPI was 5.1% in November 2021), before beginning to fall back either at the end of the year, or into 2023. This is not guaranteed; however, the Bank of England believes that short term inflation is only transitory and should start to head back towards its target of 2% once the post-pandemic economic rush is more controlled.

The Bank of England said households face "substantially" higher energy bills in 2022, and we also saw a rise in food prices in the run-up to Christmas. The Bank of England's latest Monetary Policy Report expects price rises to outstrip pay increases in 2022 and 2023, and therefore real incomes are expected to barely grow in 2024.

The inflation control 'tool' that the Bank of England tends to favour is the base interest rate, with an increase from its historic low of 0.1% to 0.25% in December 2021. This is likely to see borrowing costs increase and is eventually likely to filter through to savings rates. Winners and losers in each case.

Remember that some mortgage holders have never seen the Bank of England base rate rise above 0.75% (August 2018) in the last decade plus. The last time it was above this rate was February 2009, some 12 years ago, where the rate fell over a prior six-month period by around 4% from 5%. Will we return? Unlikely, but higher rates have now certainly been signalled.

Finally, the Winter Olympic Games in China kick off in February 2022 and this should make interesting watching as the events unfold. We also look forward to the celebrations of The Queen's Platinum Jubilee in 2022, along with the Commonwealth Games in Birmingham in the summer.

However you plan the coming months, we hope that you have a great year ahead, although perhaps against a few economic headwinds. We look forward to welcoming clients and enquirers to our new office in Shaw House, Tunsgate, Guildford in 2022.

No individual advice is provided during this blog.

Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899