The last time sterling dropped to the level it is now we were in the midst of a financial crisis back in 2007–2008. Luckily, we are not in such dire straits again just yet, but is this a sign that inflation is about to sky rocket?
Like Marmite-gate, we are prepared for the things we buy to rise in price, but this may not be a gradual process. The process has been likened to a bomb, in that prices will explode almost instantly next year when the effect of the impending Brexit finally starts to bite. This price hike will mostly be due to the increased cost of importing and also to the drop in the value of sterling, which is unlikely to recover.
It is thought that those on low incomes will be hit the hardest, with the cap on benefits restricting spending and squeezing the budgets of those living on the bread line. But it is thought that it will have such a widespread effect that those on comfortable budgets will also be affected.
It may happen that the economy is subject to high inflation and at the same time will also be in recession … not an ideal situation to say the least. High inflation could lead to high interest rates as the Bank of England uses interest rates to attempt to regulate inflation. So, if you want to be extra cautious, it may be time to look again at that tracker mortgage or variable rate loan and fix them at a low point before these effects start to take hold.
It will certainly be a rocky road ahead, but surely one that we can overcome.