Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

THE headline rate of inflation eased back to 2% in June adding to a chaotic picture for prices right now.

The rate of price rises in June took many experts by surprise - they had been expecting a steeper increase after the official inflation measure, the Consumer Price Index, rose to 2.5% in May.

So, does the fact that inflation eased back mean that the inflation threat is over? Not by a long chalk.

Households don’t need to be told that, whatever the official rate of inflation is saying, their monthly outgoings are going up in several areas. The figures published today - like all official data - reflects a complicated picture and some statistical quirks.

In particular, the June 2021 figure compares price changes with a year ago, when many items had been unavailable for several months at the start of lockdown. When those items came back in June 2020 many had risen in price. The fact that they have not risen in price by so much in June 2021 means the rate of inflation falls. Lies, damn lies and statistics.

Beyond that, several items that consumers are particularly sensitive to have been getting more expensive. Petrol and diesel prices have been one of the biggest contributors to inflation this year, as anyone filling up now will tell you. Energy prices are on the rise to and a 12% rise in wholesale energy prices this summer is expected to hit homes from October - just in time for the winter when the heating gets jacked up.

And in one area we all pay close attention to - house prices - inflation is rampant. The Office for National Statistics does not include the price of houses in its official inflation measures, but it does publish a separate inflation figure for residential property. This showed average house prices in the UK rising by more than 13.2% a year. That doesn’t translate exactly into higher monthly outgoings because mortgage rates are still very low, but it will be reflected over time as homebuyers take on larger debts to secure the house they want. And if you are saving to buy a new property the amounts you have to put aside will be higher, further depressing what’s left for spending.

Inflation is expected to resume its upward trajectory and the Bank of England has said it expects price rises to hit 4% this year. If you need returns on your savings and investments to match - and with luck exceed - price rises the challenge is about to get tougher. Investing in companies that have the potential to pass on higher costs means you have the chance of benefitting from rising prices as well as being punished by them.

Watch the video below for an expert view on how to protect your portfolio from inflation with James Thomson, Fund Manager of the Rathbone Global Opportunities Fund.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.

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