Inflation is once again uncomfortably high and rising. Latest official
inflation figures from
the ONS reveal show that consumer prices index (CPI) inflation - the Government's target
measure - ran at 4.5% in August 2011 - once again more than double the official target rate of 2%. Retail prices index (RPI) inflation, meanwhile, rose by 5.2% over the same period.
RPI is consequently 3.2 percentage points above the headline whole economy pay award, which stands at 2% over the three months to 31 August 2011, according to latest readings from the XpertHR pay databank (XpertHR subscription required).
How much further might we expect inflation to rise?
CPI is widely expected to top 5% at some point in the next few months. But it may not rise much further thereafter.
Bank of England Monetary Policy Committee (MPC) member Adam Posen argues that CPI is "about to peak." Posen believes that inflation will then fall back, once "temporary factors" (such as the influence of the January 2011 VAT hike) fall out of inflation data. He says:
RPI is consequently 3.2 percentage points above the headline whole economy pay award, which stands at 2% over the three months to 31 August 2011, according to latest readings from the XpertHR pay databank (XpertHR subscription required).
How much further might we expect inflation to rise?
CPI is widely expected to top 5% at some point in the next few months. But it may not rise much further thereafter.
Bank of England Monetary Policy Committee (MPC) member Adam Posen argues that CPI is "about to peak." Posen believes that inflation will then fall back, once "temporary factors" (such as the influence of the January 2011 VAT hike) fall out of inflation data. He says:
The point is that the UK's economic recovery is weak, and has been weak in precisely the ways that fit with a mainstream view of what happens following a financial crisis. Given that dynamic, there is no reason to think that there will be sustained higher inflation in the UK.However, as we reported earlier this week, new upward pressure could be exerted on inflation if the MPC votes to extend its programme of quantitative easing in the near future - as seems a distinct possibility.
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