Rising Inflation

The Bank of England has published its quarterly inflation report, with its findings carrying little hope for consumers. The report found that economic growth is likely to fall below estimated figures, whereas inflation could rise significantly.

Senior officials have said the lack of growth has come from a lower than expected consumer spend, public sector spending cuts and overseas business investment. The poor performance of the UK’s exports to struggling Europe is also said to have negatively affected growth potential.

The inflation rate as measured by consumer prices index (CPI) has now reached 2.7pc, 0.7pc higher than the Bank of England’s estimated 2.0pc figure. Research has also revealed that it is the richest and the poorest that have been hardest hit by this increase. With the richest facing an inflation rate of nearly 3.0pc due to increased university fees and the poorest of the UK facing a rate of 2.8pc due to an increase in essentials such as food and water.

This lack of growth poses a difficult challenge to the Bank of England. With consumers spending less and less, organisations are forced to lower their prices in order to prompt increased spend. This has typically in the past created a commodity collapse, for example in 2008/9 oil prices fell from $150 to $40 a barrel. However, we are not seeing such trends at this point in time. Oil remains at around $110 a barrel, gas and electricity continue to rise. Food prices are also on the up.
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