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RPI inflation nearly 4% !

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stevensfo
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RPI inflation nearly 4% !

#427573

Postby stevensfo » July 14th, 2021, 9:25 am

RPI 3.9% CPI 2.5%

https://www.ons.gov.uk/economy/inflationandpriceindices

Last time I looked, I could get a 2-year fixed rate of 1.1% via AJBell.

Nice to know that I can slow down the disappearance of my cash slightly. :?

Steve

1nvest
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Re: RPI inflation nearly 4% !

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Postby 1nvest » July 14th, 2021, 12:01 pm

stevensfo wrote:RPI 3.9% CPI 2.5%

https://www.ons.gov.uk/economy/inflationandpriceindices

Last time I looked, I could get a 2-year fixed rate of 1.1% via AJBell.

Nice to know that I can slow down the disappearance of my cash slightly. :?

Steve

Relativity. Historically at times of high/rising inflation, significantly lower stock/bond prices, the stock (bond) purchase power of cash has risen more than 300% over the space of just a couple/few years (cash bought four times as many shares). Whilst infrequent, a common driver of periods of cash appreciating 60% annualised are fiscal policies such as printing excessive amounts of money, so given recent events it seems we might be more closer rather than distant from such a event.

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Re: RPI inflation nearly 4% !

#427611

Postby Laughton » July 14th, 2021, 12:50 pm

Last time I looked, I could get a 2-year fixed rate of 1.1% via AJBell.


I appreciate that you say "could" rather than "have" but, if you were to go ahead, how would you feel if six or so months down the line inflation was a fair bit higher and deposit interest rates had followed?

stevensfo
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Re: RPI inflation nearly 4% !

#427614

Postby stevensfo » July 14th, 2021, 1:02 pm

Laughton wrote:
Last time I looked, I could get a 2-year fixed rate of 1.1% via AJBell.


I appreciate that you say "could" rather than "have" but, if you were to go ahead, how would you feel if six or so months down the line inflation was a fair bit higher and deposit interest rates had followed?


Agreed. For this reason, I have a ladder of fixed interest deposits, but all 1-year terms. From what I see, the slightly better rates for a 2-year term aren't sufficient to overcome the possibility of getting left behind if rates start to creep upwards.

Steve

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Re: RPI inflation nearly 4% !

#427660

Postby 1nvest » July 14th, 2021, 3:01 pm

how would you feel if six or so months down the line inflation was a fair bit higher and deposit interest rates had followed?.
I have a ladder of fixed interest deposits

A not marked to market 10 year gilt ladders yearly gain can be approximated (as not all rungs will be exactly equal £££ weighted) as the average of the prior 10 years ten-year gilt yields

Each year as one rung matures you roll the proceeds into another 10 year.

That induces a lag factor, time shifts rewards out of cycle with other assets, which is a form of diversification/risk-reduction. When yields are low however instead of rolling into another 10 year you can roll into shorter duration, perhaps 5 or even 3 years. Shorten down average maturity/duration. Similarly if yields looked relatively good/high, then you might roll into a 15 or even 20 year.

For 2021 the straight 10 year ladder is set to provide a 1.75% reward.

Another approach is to assume that the yield curve remains unchanged and buy at near the peak of the steepest part of the yield curve, where the yield drops off the quickest and hence has the higher capital value price change/increase. Buying and selling after a year/whatever, marking to market. In such cases you may even be able to turn a -2% type real reward when held to maturity on average index linked gilts into a 0% real. "Rolling down the yield curve" (Google it).

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Re: RPI inflation nearly 4% !

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Postby yorkshirelad1 » July 15th, 2021, 9:57 am

stevensfo wrote:RPI 3.9% CPI 2.5%

https://www.ons.gov.uk/economy/inflationandpriceindices

Last time I looked, I could get a 2-year fixed rate of 1.1% via AJBell.

Nice to know that I can slow down the disappearance of my cash slightly. :?

Steve


https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/june2021

RPI: 3.86% (annual to June 2021)

At least I've got some ILSC which are on RPI until May 2024 (NS&I changed to CPI in May 2019)
https://nsandi-corporate.com/news-research/news/nsi-confirm-index-linked-savings-certificates-move-rpi-cpi

CPI: 2.48% (annual to June 2021)

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Re: RPI inflation nearly 4% !

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Postby ADrunkenMarcus » July 15th, 2021, 8:48 pm

stevensfo wrote:RPI 3.9% CPI 2.5%

https://www.ons.gov.uk/economy/inflationandpriceindices

Last time I looked, I could get a 2-year fixed rate of 1.1% via AJBell.

Nice to know that I can slow down the disappearance of my cash slightly. :?

Steve


I'm quite happy that the interest rate on my mortgage is less than inflation!

Best wishes


Mark


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