Inflation ‘hits youngest most’

Young people in debt are now being hit hardest by inflation, according to a new study.

The Consumer Prices Index (CPI) figure may be at its lowest since November 2009 after dropping to 2.2 per cent in September, but young adults are least likely to feel the benefits, according to the Alliance Trust.

Its research has found adults of all age ranges experienced a slowdown in the extent to which their cost of living is rising, but for most this is now effectively two per cent, while 0.3 per cent higher for those aged under 30.

The study found that this group is less likely to benefit from easing in utility prices over the past year, as well as being hit by higher education fees and increases in alcohol and tobacco costs.

Chief economist for the trust Shona Dobbie said: "The fact that the youngest age group faces the highest rate of inflation also highlights some of the problems currently facing this particular group. Higher levels of inflation in education fees and alcohol and tobacco are having a real impact on this age group."

At the same time, she noted that the benefits of lower energy prices in the latest inflation figures are set to be short-lived after a raft of recent announcements of price hikes.

This situation could potentially reverse the recent trend of falling inflation, which has seen the CPI rate fall by three per cent in the past year.

Saga, which concerns itself with the interests of older people, has gone on to question whether the Bank of England's Monetary Policy Committee (MPC) is still committed to meeting the Treasury's two per cent target rate of CPI.

Its director general Dr Ros Altmann, a critic of the bank's quantitative easing policies, has said the "expansionary" monetary policy being pursued by the MPC combined with upcoming energy price hikes makes avoiding a fresh rise in inflation "impossible to reach".

By James Francis