Inflation or deflation, take your choice
News that core inflation in UK fell from 2.2% to 1.8% in June has been welcomed across the City but there are still fears for the future. Reduced demand in the food sector has seen prices fall with many experts expecting core inflation could fall below 1% in due course. However, when you add back in mortgage payments inflation is actually negative at -1.6% in June against -1.1% in May.
The issue of inflation/deflation is something of a double edge sword as we could see the cost of living in the UK fall further in the short-term yet suddenly spike up as and when the UK economy recovers. The next six months will be a very difficult period for the UK government and the Bank of England who will need to monitor all reports and signs regarding the cost of living in the UK and take the necessary action.
Many analysts believe that when the UK economy does finally spark back to life we will see UK base rates rise significantly in a very short space of time to offset the potential problem of inflation. However, this may occur six months down the line, one year down the line or may be longer depending upon the short to medium term performance of the UK economy.
Share this..
Related stories
Why is investment the life blood of the economy?
While stock markets have been very volatile to say the least over the last 18 months it is worth remembering that investment into the UK economy and UK companies is the lifeblood of the future of the country. The ability and necessity for companies to grow and individuals to receive a return on their investment is the backbone of any economy and the UK is no different. Any recession and any boom t...
Read MoreSo is the threat to the UK financial markets for real?
The revelation that UK financial outfit Tullet Prebon has given traders the option to relocate their trading desks overseas has been seen by many as a shot over the bows of the UK government. This is the opening shot of what promises to be a very high risk and a very real battle between the UK government and the UK financial sector. However, when you bear in mind that these financial companies tak...
Read MoreThe UK is ranked the world's leading financial centre
In a surprise development the World Economic Forum (WEF) has today released a report stating that the UK has overtaken the United States as the world's leading financial centre. This comes at a time when the UK is under significant pressure from not only an economic standpoint but also from EU regulators who appear determined to wrestle control of the city. However, for the UK to come out top of t...
Read MoreErnst & Young drops a bombshell on UK property sector
The Ernst & Young LLC Item Club has dropped a bombshell on the UK housing market with the suggestion that while prices will increase in the short term they are highly likely to return to a slump in the latter part of 2010. While the UK government has already ridiculed this particular report, this report is from a very influential group of city analysts and economists who have for some time "had th...
Read MoreDIY sector on the rise
In a sign of the times, B&Q parent company Kingfisher has today revealed profits which are nearly 40% higher compared to the six-month corresponding period last year. This is a major development in the DIY sector which has been one of the main casualties of the recession. So is the DIY market leading the UK property sector higher?
It would appear that while many people are still loc...