How not to get beaten by inflation

With inflation at 9%, and the bank rate at 1% you’re not going to get a real return on cash. But there are steps you can take to beat inflation, says Merryn Somerset Webb.

Jerome Powell
Jerome Powell: talks tough, but will he act?
(Image credit: © JIM WATSON/AFP via Getty Images)

This week we learnt something I suspect most of us already knew: inflation is high and rising. UK data for April has the consumer prices index (CPI) rising at an annual rate of 9%, a 40-year high. Measured by the retail prices index (which CPI replaced) it’s 11.1%. It was last 11% in February 1982, having breached 11% for the first time since January 1952 in January 1974. In short, 11% really doesn’t happen very often.

However, here is something that has never happened: 11% RPI and 1% bank rate. In early 1974, the rate was 12.7%. If you’d had cash in the bank, you’d have made a real return (ie, beat inflation) for much of the 1970s. There were nasty bits in the mid-1970s when RPI inflation breached 20% and rates were just 15%, but in all, holding cash in the 1970s wasn’t as destructive to your wealth as you might have thought.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.