COMPLIANCE
Mathew Akrigg ACIPP, policy and research officer, the CIPP, explains what inflation and interest rates are, and how they can impact the processes carried out by payroll professionals
W e’re told inflation and interest rates are linked, and as they dictate a lot of the financial world which surrounds us, we need to understand them. But they’re also topics that no-one but economists seem to have a full grasp on (and even then, you would be forgiven for thinking that economists seem to be winging it too). So, how does this all affect us, the payroll professionals, in our work? If you have, or are looking to get, a mortgage, then I’m sure you’ve been keeping an eye on the interest rates like a hawk. The Bank of England (BoE) base rate is revised around every month and dictates the level of interest it will charge
on a one-day loan. This doesn’t mean a lot for you and me, but it does mean that it impacts financial institutions and large businesses across the country, the most significant of these impacts being mortgage and loan rates. What gets slightly more complex is why the BoE does this. It is tasked with keeping consumer price index (CPI) inflation to 2% per year. Meaning that each year, the cost of goods and services will be 2% higher than they were at the same time 12 months earlier. CPI is a measure of the cost of living,
taking a set of goods and services, weighting their impact according to a methodology and comparing their
| Professional in Payroll, Pensions and Reward | November 2023 | Issue 95 32 | Professional in Payroll, Pensions and Reward | November 2023 | Issue 95
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