Why this month’s inflation figure matters for you

The cost of living is always important to our finances, but this month’s cost of living has a particularly extra impact on millions of people.

Inflation, the rate at which prices rise, affects what we pay in shops, the extent to which benefits and state pensions increase, and changes in interest rates.

this Inflation data released on Wednesday – 1.7% – is the rate the government typically uses when determining April benefit increases.

With just two weeks to go before the government’s first Budget, the chancellor has warned that “tough decisions” will be made on benefits, tax and spending.

Here are some of the ways it will directly impact you and your money.

By law, payment amounts for certain benefits should rise at least in tandem with prices.

They include all major disability benefits such as Personal Independence Allowance, Attendance Allowance and Disability Living Allowance, as well as Carers Allowance.

Other benefits, including Universal Credit – the most common benefit claimed by 7 million people – are expected to rise in line with inflation, but this is a decision for ministers.

Typically, September’s Consumer Price Index (CPI) inflation measure, which is the benchmark for this increase, stood at 1.7%.

In pounds and pence, the Universal Credit standard allowance for singles under 25 will increase by £5.30 a month to around £317.

According to investment platform AJ Bell, for a couple aged over 25, monthly increases could range from £10.50 to £628.

However, it’s worth remembering that the amount of Universal Credit depends heavily on your circumstances, such as income, children or disability. Adding 1.7% to your current benefit amount should give you a fairly accurate estimate of the amount you will receive in April.

Some 58% of Universal Credit claimants are women, of whom 38% are in work.

People receiving Attendance Allowance (or Personal Independence Allowance at the highest rate) are expected to see an increase of around £1.85 a week in April.

The increase in benefits was slower than the 6.7% increase in April, reflecting higher price increases a year ago.

The timing means the increase in benefits will be relatively small.

September’s inflation data was lower than expected.

Next month, rising energy bills that took effect earlier this month are expected to push inflation up again when the next data is released a month later, but it will be too late to link benefits.

The Government, and in particular the Secretary of State for Work and Pensions (no doubt working closely with the Chancellor of the Exchequer), could decide to set a higher growth rate for benefits. Charities would welcome such a move, but it is highly unlikely.

The increase in state pensions in April was affected not only by inflation but also by what is known as “inflation”. Triple lock.

Under this arrangement, the state pension increases each year by 2.5%, inflation or earnings growth – whichever is the highest.

This time, the latest data confirms the highest earnings growth – 4.1%. This is expected to mean:

• The new full flat state pension (for those reaching state pension age after April 2016) is expected to increase to £230.30 per week. This would make £11,975 a year, an increase of £473 on now.
• The full old basic state pension (for those who reached state pension age before April 2016) is expected to rise to £176.45 per week. This would make £9,175 a year, £361 more than now.

Notably, millions of pensioners will Lost winter fuel billsValue up to £300 due to government cuts.

With inflation currently below the Bank of England’s 2% target, this paves the way for further interest rate cuts.

This would make borrowing cheaper but could mean lower returns for savers.

Analysts said a rate cut was now more likely after the central bank was widely expected to cut rates in December. The current level is 5% November.

This could give mortgage lenders more confidence to lower the interest they charge on new fixed-rate home loans.

Many people face higher monthly payments because interest rates are higher than what many people have been used to for a decade.

Separate official data showed that people renting An increase of 8.4% from a year ago – Shows tenants face ongoing financial pressure.

Overall, borrowers and consumers remain somewhat nervous about the budget announced by Chancellor Rachel Reeves on October 30.

Government sources told the BBC she was seeking tax increases and spending cuts Worth £40 billion.

Lower inflation can help or hinder governments.

That means the Treasury Department could face a slightly weaker-than-expected benefit bill.

However, lower inflation and rising wages may result in fewer people bearing higher tax rates, although Threshold has been frozen.

This means the government may also reduce tax revenue as a result.