Is inflation dead?
The substantial fall in the rate of inflation has been welcomed across the board in the UK with investors and consumers now beginning to look to the future. However, those who believe that inflation has now been beaten and is dead may well need to review their opinions in the future. We have been in this situation before when the authorities have suggested that not only was inflation beaten but the boom and post scenario so commonplace around the world was also dead.
Inflation has a habit of biting back when you least expect it and those who now take their eye off the ball may well suffer in short to medium term. One possible concern for the short to medium term is the fact that due to the weakness of sterling, imports are likely to get more and more expensive over the coming months. Unless sterling starts to pick up very soon this is another situation which could lead to a rise in the rate of inflation although it is unlikely to be anywhere near the recent peak.
For the time being inflation seems to be on the way down but whether it will fall into the government's preferred band is very debatable in the short term.
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