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Week 1: Why and how should we invest for the future?

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This graph charts interrelationships of, ‘inflation (RPI), ‘nominal interest rates’ and ‘real interest rates’ in the UK over the period of 1980 to 2023.

The general trend in the levels of interest rates and inflation over the period has been downward, with interest rates in 2020 being at an historic low. Real interest rates rose in the 1980s but the clear trend since then has been downward too. Recent years have seen negative real interest rates (i.e. price inflation has been higher than nominal interest rates).