Businesses are preparing for significant increases in National Minimum Wage and National Insurance Contributions, following Rachel Reeves's budget. As a result, prices are expected to rise, impacting consumers, particularly those in low-income households. The Consumer Price Index (CPI) rose to 3% as of January 2025, reflecting these economic changes. The rising inflation, exacerbated by higher public sector wages without improved efficiencies, may limit the Bank of England's ability to decrease interest rates, signaling ongoing financial pressure for consumers and businesses alike.
The UK Consumer Price Index (CPI) rate went up to 3% for the year to January 2025 per the Office of National Statistics (ONS). This is compared to a rate of 2.2% as of July 2024. The increase in CPI was almost inevitable after Rachel Reeves's Budget in October 2024.
Lower income households who may already be struggling with the cost of living will feel the pinch from this increase acutely.
It is easy to see that this pressure on prices will only increase over the coming months, as those firms which haven't yet adjusted their prices for the forthcoming wage and NIC rises will need to do this in the next few weeks.
The fact that the Government gave significant pay rises to various public sector workers without any evidence of improved efficiency via changes to working practices in the Autumn is also helping to push up inflation.
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