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Will Inflation Hit 5% By The End Of September?

As officials get ready to release inflation data for July this week, many experts are forecasting a rise to 4.1% from 3.8% in June. However, while this is bad news in itself it seems inevitable that it will get much worse in the short term. Many economists are looking to inflation to rise above 5% in September as the increase in energy bills only just starts to hit home. This will not only prompt another letter from the Bank of England to the Treasury explaining the position but it will ensure that interest rates cannot move any lower.

Just a few months ago inflation was moving along nicely around the 2% level and everyone seemed happy, the housing market was rising, spending was on the increase, cost increases were minimal and wage inflation was flat. But look at the damage inflation has done to the economy since then and there seems to be much more pain to come in the short to medium term.

If ever there was an example of the power of inflation, the performance of the UK economy over the last 6 months has given one of the best case studies you could expect to see. Wage inflation is rampant, the cost of living continues to rise and companies are struggling to pass extra costs onto consumers.

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