Fool Poll Reveals Truth On Inflation

Inflation is on the up and so are interest rates. What's worse, a Foolish survey suggests that official inflation figures understate the scale of the problem.

The official inflation figure -- the consumer price index (CPI) -- has risen to 3%. (In other words, prices across the board have supposedly risen by 3% over the last 12 months.) Now, based on my day-to-day life, that seems too low to me and a Foolish survey suggests that you agree.

It doesn't take long to realise why the CPI figure is so low. It excludes housing costs! A place to rest our head at night is obviously a luxury...

The old fashioned RPI (retail price index) figure does include accommodation and it's risen to 4.4% this month, its highest level since 1991. This figure has a closer proximity to real life, but I still reckon it doesn't fully reflect the rising costs that many of us now face.

We conducted a Foolish inflation survey last week where we asked 1500 Fools what they thought was the true inflation rate for them. Over two thirds of respondents said they thought that, in reality, prices were rising at an average rate somewhere between 4 and 9% a year. Worryingly, 1 in 4 people said their household inflation is more likely to 10 to 15%!

Overall, the average reported Foolish inflation rate was 7.4%, significantly higher than even the RPI figure of 4.4%.

What does this mean for ordinary Fools?

Well, if ordinary people think inflation is running at a relatively high level, they will at least try to secure a higher wage to reflect that. Higher wages are themselves inflationary which could make it tough for the Bank of England to get rising prices under control.

All that points to further interest rate rises this year until price rises slow down. As Fools, that means we must strive even harder to be prudent with our finances. Get the best possible deal on your mortgage, and take a look at some of our money-saving tips which could help you cut your household expenditure.

More: Halve Your Personal Inflation! | Interest Rates Don't Just Affect Mortgages

We'll be conducting more Fool surveys in the next few months. Look out for them in our Inside Money email which delivers all the latest news and views on personal finance straight to your inbox.