Surprise inflation rise to 4% – what’s next for markets, savings and mortgages?

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What does a surprise rise in inflation mean for markets, savings, and mortgages?

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Published on 17 January 2024

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Frustration is in the air as UK inflation stays stubborn. The slight rise in the headline rate to 4% is the last move anyone wanted to see, pushing the prospect of interest rate cuts further down the line.

There had been hopes that drops in energy prices and food inflation in December would keep the price spiral going.

But, rises in tobacco prices because of duty increases helped push the headline rate back up. It’s still double the Bank of England’s (BoE) 2% target, so monetary policymakers will probably stay ultra cautious about the prospects for rate cuts this year.

There are also concerns that tensions in the Middle East could fan the flames of inflation. There are supply chain jams, leading to concerns about stock delays and potential price increases. This is because ships are actively avoiding the Red Sea, after a series of attacks. Retaliatory airstrikes on targets in