Easter Effect Keeps Inflation in Check – Fidelity’s Maike Currie Comments

Maike Currie, investment director for personal investing at Fidelity International, said: “Inflation exceeded the Bank Of England’s 2% target rate for the second month running with today’s CPIH figure of 2.3% showing price rises unchanged from the previous month. A fall in air fares and petrol prices offset an increase in the cost of food, alcohol and tobacco, and clothing. The Easter break falling later this year compared to 2016 kept price rises in check, however, the ‘Easter effect’ will kick in this April, so expect a further lift in inflation when figures are released next month.  

“Retail sales figures from the British Retail Consortium released overnight showed that the rise in inflation is already starting to bite, with non-food high street sales suffering the worst fall in nearly six years.  With price rises outstripping wages, we are getting progressively poorer each month. Unsurprisingly, consumers are choosing to instead focus their spending on essential items like food and fuel. Changing shopping habits and a fall in spending should flash amber warning lights for an economy reliant on confident consumers hitting the shops.

“Rising inflation also has implications for savers, investors and retirees as it erodes the spending power of future interest and dividend payments and eats away at the worth of your original capital.

“Inflation never looks like a problem, until suddenly it is a big problem. Once pricing pressures become entrenched, consumers’ feel the pain, companies don’t invest and the market gets worried. The time to protect yourself against the return of inflation is before it happens and physical assets such as gold, agriculture and property are all good protectors against the wealth-eroding effects of inflation. You can invest in gold via a fund which invests in the shares of gold mining companies, such as the Investec Global Gold Fund or tap into property via the BlackRock Global Property Securities Equity Tracker Fund which benefits from the liquidity offered by real estate equities.”