Today's budget and the economic environment that we are living in

The Consumer Prices Index (CPI) rose by 11.1 per cent in the 12 months to October 2022.?This is a?1%?increase in just one month, according to the Office for National Statistics (ONS).

The jump in inflation was higher than expected and largely due to increases in the cost of energy. and the impact that this has on food production.?Inflation?is now at the fastest pace since 1977.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 9.6 per cent in the 12 months to October 2022, up from 8.8 per cent in September 2022. The annual inflation rate was last higher in the constructed historical estimates in December 1980, when it stood at 9.8 per cent.

The one good thing to come out of the disastrous Truss budget , ( I use this term loosely?as it was offered to everyone regardless of their financial situation ), was the monthly energy fiscal support.?It has helped suppress the impact rising inflation has on the CPI until it is reviewed in April 2023.?

Whilst Putin's bombs destroy, curtail food production in Ukraine and block food its distribution and he continues to turn off gas supplies, inflation will continue to rise.?

Whatever the budget states today, it should try to soften the hardship that many UK households are enduring.?The main issue with Truss's?budget was that its attempts to do all things for all men left a massive great deficit hole which scared the financial institutions,?especially as she had not run it past the OBR first. It makes me wonder who is in charge of the monthly budget in Liz Truss's household!

There is an argument that maybe we should not be trying to completely balance the books in today's budget if by doing so, we push everyone into austerity and the country more quickly into what looks like an inevitable recession. We will not be alone, many countries will be in the same position as The UK as the ravages of inflation take a stranglehold on economies.

It is important to remember that The Bank?of England pulls the strings on where our Bank Base rate lies.?Many working in the UK financial sector ( myself included ) have been of the opinion that The Bank, like the Fed in The USA, should have acted a lot quicker in trying to nip inflation in the bud. Whilst many countries have been slowly weaning themselves off years of Quantitative Easing, including ourselves, it was really important to regulate interest rates better than has happened in reality over the past 2 years.?

Obviously no-one but Putin knew about the impending war in Ukraine.?Although hindsight and history will tell you that if you give a leader of this aggressive mentality an inch, they will gladly accept several thousand miles. It was far too?easy for him to annex Crimea...the world just watched and did nothing. In February it was Putin's gamble that?the?same would happen if he tried to quickly?invade the entire country, especially as it is not a NATO state, and cannot become one whilst it is at war.

This war has been devastating to Ukraine, and it will be to billions of people who live in the?African?continent as they struggle to find?food to eat.?

Already we are seeing the impact of buckling down the hatches in this country when it comes to expenditure. Judging by the recent?0.2 per cent downturn in GDP?the UK is moving into recession along with other global economies.?

History?shows that by?changing consumer thinking and practices to just spending?on essentials and nothing more, inflation should peak and start to come down. But if the trend to give pay rises?continues, the double edged sword will ensure that by helping everyone in this way,?we are actually making things worse, as it will fan the flames of inflation, and the?index will actually continue to rise. Sadly the Ukrainian curve ball is going to mean that rising energy and food costs are here to stay for the foreseeable future and this means high inflation too.?

I do think that the budget will have some form of energy assistance within it.?But the present energy cap and subsidised energy price are presently suppressing?the current rate of inflation. If this level of fiscal assistance is reduced, we could be travelling on an inflation rollercoaster for at least another 12 months.

We are already seeing the slow reduction in the value of our homes and on the flip side the increase in mortgage interest rates and monthly rents. Regionally London will be the first to be negatively impacted ( at best freezing values ) and by the same token, the first at some point to recover. We are beginning to see a cooling of the property market, as?homebuyers give the idea of homeownership the cold shoulder following a sizable uplift in the cost of borrowing.??

I don't think that we are heading for a full blown property recession whilst there remains a lack of supply vs demand.?