Top 3 Financial Impacts In 2022

We are set for a bumpy financial road in 2022. Given the rise in inflation, interest rates, and ongling disruption to international supply chains, we take a close look at how this is impact everyday life. More importantly, the financial impact it could have for you.

High Inflation

Firstly, inflation is the rate at which prices increase. Let’s use a bottle of milk as an example. If it’s £1, and increases to £1.05, then the milk inflation is 5%. Usually, inflation increased in small incremental amounts which usually goes unnoticed. However, inflation is rising so quickly that the money people are currently earning isn’t going as far – its purchasing power is decreasing.

The cost of living has risen to 30-year all-time high. Food costs are soaring, and the energy bill crisis has driven inflation up to 5.4% in the 12 months leading up to December 2021. All this is a huge gut punch for families already struggling and considered on the poverty line in the UK. The last time inflation was this high was March 1992, when it was 7.1%. With energy costs set to rise even more as we head into Spring 2022, we could head into more increases.

The government’s price cap has always kept energy bills in check for households across the UK. However, this is due to be revised on April 1st. Consequently, we could see fuel bills increase by another 50%, industry experts say.

Rising Interest Rates

Interest is the cost of borrowing money and it’s usually given an annual interest rate. It’s one of the main ways banks try and slow inflation. However, the pandemic has led to soaring demand of borrowing money and supply shortages which has sent inflation to new high as abovementioned. Consequently, interest rates are going up too.

The Bank of England is also predicted to raise interest rates in 2022. In the UK, interest rates have risen for the first time in more than three years in December 2021, from 0.1% to 0.25%. Here’s a few examples of how rising interest rates will impact you:

• If you’re a homeowner, you may see an increase in the cost of your monthly repayments. The amount will of course depend on the size your initial loan.

• If you have borrowed money, like credit cards, same day loans, or car loans, the interest rate on these may rise. The decision to take out a loan shouldn’t be taken lightly and could lead to more financial burdens. Indeed, there are already concerns among policymakers about rising household debt globally, and the ability of consumers to pay back their debts.

• On a positive note, higher interest rates can benefit those who are saving money. You can receive better return on your savings. Take this as an opportunity to save rather than spend.

Disrupted International Supply Chains

It’s clear that the pandemic has impacted us in more ways than one, both as individuals and as a society. One way it is impacting us as a society is supply shortages. The pandemic has caused massive disruption to the manufacturing and transport of goods. This has resulted in increased shipping costs among other expenses. These rises are in part, contributing to the rise in living costs. For example, low supply is causing increases in the price of food.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes