One benefit of High Inflation?

QrizB

jimjames said:

Latest forecast for inflation in January is 21.4% for RPI. If it's even close to that in December then the FIT rate will leap from April.

Citigroup expects the retail prices index (RPI) measure of inflation, which is not classified as an official statistic, but is linked to rises in rail fares, air passenger duty, mobile phone tariffs and about a quarter of UK government debt interest, to hit 21.4pc next January.

So far, since last December, the RPI (the index, not the rate) has risen from 317.7 in December 2021 to 343.2 in July 2022. That's a baked-in increase of 8% with five months yet to go.

Are we going to add another 12% in those five months? I'm not going to guess!

gefnew

The ons state that it is higher. 

anon_ymous

jimjames said:

Seeing the BoE inflation forecasts yesterday made me think about the impact on the FIT rates paid which are based on December RPI. Last year was around 7% increase but from the forecasts it would seem that we're likely to be looking at 15% or more for RPI by December so next year could be quite a massive jump in the rates that are paid to well over 70p for the early adopters. Some small comfort if you get FIT payments that could partially offset the massive jump in energy bills along with the generated electricity from solar panels.

The other "benefit" isn't necessarily from high inflation in itself.  It's easier to tolerate say your bills going up from £1000/year to £1100 a year, but when they are reaching at least triple that price, it means long term energy reliance and reduced carbon emissions especially when people are thinking about ditching gas altogether.

A pretty terrible way to go about it but that's a silver lining 

Martyn1981

jimjames said:

Latest forecast for inflation in January is 21.4% for RPI. If it's even close to that in December then the FIT rate will leap from April.

Citigroup expects the retail prices index (RPI) measure of inflation, which is not classified as an official statistic, but is linked to rises in rail fares, air passenger duty, mobile phone tariffs and about a quarter of UK government debt interest, to hit 21.4pc next January.

Interesting. I wonder if the FiT rate can be negative, since at some point the energy prices will have to come back down, and if inflation (overall) is then negative, then it would only be fair for the FiT to reflect that.

QrizB

gefnew said:

The ons state that it is higher.

That's 13.7% since July 2021, not since December.

Spies

Petriix said:

The real benefit of high inflation is for those who borrowed money to pay for money saving technology like solar panels. If you can pay it back when the money is of lower value then it effectively works out cheaper. ROI calculations for solar, batteries and EVs are looking better by the day. 

Can you explain this for a numpty as I don't really understand how inflation makes a CC debt less?

My CC is 0% APR that I used for my install, is that statement based on someone with an interest rate?

QrizB

Spies said:

Petriix said:

The real benefit of high inflation is for those who borrowed money to pay for money saving technology like solar panels. If you can pay it back when the money is of lower value then it effectively works out cheaper. ROI calculations for solar, batteries and EVs are looking better by the day. 

Can you explain this for a numpty as I don't really understand how inflation makes a CC debt less?
My CC is 0% APR that I used for my install, is that statement based on someone with an interest rate?

The idea is that, as prices rise, wages (and investments, index-linked pensions etc) rise with them but the cost of the loan stays the same.

Petriix

Spies said:

Petriix said:

The real benefit of high inflation is for those who borrowed money to pay for money saving technology like solar panels. If you can pay it back when the money is of lower value then it effectively works out cheaper. ROI calculations for solar, batteries and EVs are looking better by the day. 

Can you explain this for a numpty as I don't really understand how inflation makes a CC debt less?

My CC is 0% APR that I used for my install, is that statement based on someone with an interest rate?

It's as simple as this: if inflation hits the anticipated 18% next year on top of this year's 10% the £5k you borrowed last year will be worth roughly the equivalent of £3850 after 2 years. It's likely that whatever income you receive will increase in that period and any assets you own will increase in value. 

Chris_Type_R

gefnew said:

The ons state that it is higher. 

Do you have a URL for that ?

gefnew

Try this for more info and downloads.
Inflation and price indices - Office for National Statistics (ons.gov.uk)