UK inflation picks up to highest rate since 1992

According to Valentina Romei of the FT, “UK inflation has accelerated to the highest rate in 30 years, squeezing living standards and putting pressure on the Bank of England to raise interest rates again.”

Economists polled by Reuters expected CPI inflation to remain at 5.4 per cent and core inflation to increase to 4.3 per cent.

How will this impact your investments?

If you have a balanced portfolio, which means you have exposure to bonds, you have a decision to make. According to Bloomberg at the time of writing, the yield on UK Gilt 30 Year Yield is 1.63%. But if interest rates are on the rise, this yield can be swallowed by a potential fall in price.  Then you need to add investment charges. This means, your bonds may be losing you money in real terms.

So part of your portfolio is stuck between a rock and a hard place!

Of course, there are options, but as an investor, you need to recognise the problem.  As bonds are part of an investments portfolio, sometimes it is hard to pinpoint these problems.

It may be even more important to review your portfolio now. Try our investment audit.