Inflation: The Quiet Thief in the Room
Peter McGahan
Monday 15th September, 2025.
YOU don't need to be an economist to know something’s off when your shopping trolley costs more but contains less. Know the feeling?
Inflation. Excited to read about it or have a chat at the bar or dinner table? Either way, it’s the guest at every dinner table, nibbling away at your wallet before you've even passed the gravy.
At its heart, inflation means rising prices. But more than that, it means falling purchasing power. Your money doesn’t go as far — and that matters more than most people realise.
Who feels it most?
Imagine two people: one lives on a steady pension, the other runs a big business with property, shares, and some clever accountants. Inflation arrives. The pension doesn’t stretch as far, and every electricity bill feels like a slap with a wet fish. Meanwhile, the other watches the value of their home and investments rise with inflation. Guess who sleeps better?
Inflation is regressive — it hits those with the least the hardest. Households on tight budgets, especially where food and energy take up a big chunk of spending, feel the burn. They aren’t choosing between two brands of coffee; they’re choosing between coffee and heating.
Workers: Caught in the middle
There’s a popular story told in boardrooms and central bank meetings: if wages go up, prices go up, and round we go - the so-called wage-price spiral. But that can be wrong - or at least recently, it has been.
Non ‘mainstream economists have pointed out that recent inflation wasn’t about greedy workers demanding too much. Wages lagged behind prices.
The real worry is this: if wages don’t rise, living standards fall. If they do rise, some firms pass on costs or cut jobs. Either way, workers get stuck holding the short straw.
For borrowers, inflation is a double-edged sword. On one side, your fixed-rate mortgage gets smaller in real terms - like the universe helping repay your loan. But
when interest rates rise to “combat” inflation, repayments jump. It’s a cruel trick: inflation squeezes you, then the Bank of England tightens the vice.
Savers, meanwhile, watch their cash savings lose value unless rates on deposits keep pace. Spoiler: they usually don’t. Unless your money’s working harder than inflation, it’s shrinking. That’s why people with property and shares often sleep better - their assets may inflate too to keep pace.
Inflation doesn’t treat all businesses equally. Giant corporations with power can nudge their prices up - sometimes more than necessary - and customers grumble but still pay. Small businesses? Not so lucky. They face rising costs but can’t pass them on without losing customers.
There is a term called “sellers’ inflation” - companies with market power pushing prices up, not because they have to, but because they can. For them, inflation isn’t a storm; it’s a sail.
Inflation helps governments in some ways: tax revenues rise (VAT is a percentage, after all), and older debts shrink in real terms. But public services feel the pinch. Schools, hospitals, councils - their costs go up, but budgets often don’t. The result? Cuts, stretched staff, and frustrated citizens.
So why can’t economists agree?
Mainstream economists, the ones steering the Bank of England, believe raising interest rates is the answer. Cool the economy, tame inflation. But not everyone buys it.
Others argue this only tackles the symptom, not the cause. If prices rose because of energy shocks, supply chain snarls, or big companies flexing their muscles, then raising rates just adds pain. Higher rents, mortgages, and borrowing costs and all with no guarantees prices will fall.
It’s like prescribing a diet pill for a broken leg.
So why does inflation matter?
Because it reshapes everything. It forces families to cut back. It punishes savers. It pressures businesses. It weakens public services. It widens inequality between rich and poor, old and young, North and South.
It’s not just a number on the news. It’s the feeling that your money is melting because of someone pointing a hairdryer at it, and nobody has a fridge to keep it safe.
The best antidote? Understand it. Plan for it. And never assume that because the experts disagree, you should stay in the dark.
In a world where prices change faster than policies, clarity is your best investment.
If you have a financial question, please call 01872 222422 or email info@wwfp.net or visit us on www.wwfp.net
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
