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Inflated Opinions

Inflation in the UK is back up to 5.2% according to the latest figures published for September. The last time that it was this high was in September 2008 – the peak of the ‘credit crunch’. In September 2009, a year later, inflation had fallen again to just 1.1%. Similarly, the markets are now pricing in an average inflation level for 2012 of 2.5%, with this most recent figure the peak. Good news? Maybe not…

The lower forecast for inflation comes at a price. It is expected to fall for similar reasons for those that it fell in 2009; namely, weakening demand in the UK and the broader global economy. Is this a price we are willing to pay?

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