The current inflation rate is gradually decreasing, but it still remains in double digits. As of January, the consumer prices index rose by 10.1%, marking its lowest level since September. This means that inflation has cooled down by a whole percentage point since peaking at 11.1% in October 2022. Although price rises are slowing down, the cost of goods and services continues to rise at a higher rate compared to previous years. Consequently, the purchasing power of your money is likely to be declining in real terms.
Fortunately, global stock markets are now showing signs of recovery as interest rates approach their projected peak. Additionally, savings rates have increased, offering ample opportunities to safeguard your finances. The Telegraph provides a comprehensive breakdown of the best available options to protect your financial well-being.
1. Revamp your investment strategy
Inflation, when moderate, does not necessarily have a negative impact on stocks. Some companies can offset rising input costs by passing them on to consumers, maintaining a balance. Businesses with strong pricing power, such as utilities or large consumer brands, should be able to continue their operations without major disruption. Oil and mining companies also tend to thrive as higher commodity prices boost their profits. Certain utility groups even offer dividends linked to inflation.
However, retailers, particularly supermarkets, may struggle as they might lack the ability to increase prices. Infrastructure and real estate investment trusts often have contracts tied to inflation, resulting in increased income and dividends. Gold, known as a safe haven during times of economic downturn or volatility, might also experience a rise in value.
2. Safeguard your retirement income
Inflation has a significant impact on the longevity of retirement savings. Individuals with a basic “level” annuity will see their income eroded each year. On the other hand, those with an inflation-linked annuity will initially receive a smaller income that increases over time.
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