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Has inflation peaked at 5.2%?

The latest inflation figures did not make good reading for anyone in the UK and there are concerns in some quarters that the rate could go higher before it falls. However, there is a growing feeling that the rate has actually peaked and should fall back to lower levels in tandem with the price of oil. Which philosophy is correct?

A quick look back over the last 12 months will show that the main reason why the inflation rate crept up in the first place was the price of oil. Not only did the oil price affect the cost of energy supplies in the UK as well as petrol but we also saw increased transportation expenses for industry as a whole and higher cost passed on to the consumer.

So those who fear that the rate of inflation is set to rocket higher can rest assured that while the rate may tick a little further ahead in the short term, as the affects of the oil price start to kick in, unless we see oil surge again we should see inflation fall back later this year and throughout 2009. This will then allow the Bank of England to instigate a number of interest rate reductions to help the economy recover from a terrible 18 months.

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