Inflation in the UK

In recent months inflation has become increasingly volatile, raising concerns over whether this is a temporary issue or requires more careful attention.

The graph below shows inflation from upto start of 2009. As you would expect in a recession, inflation fell sharply – leading to deflation on RPI measure.

Since then, the inflation rate has crept up, despite the economy struggling to recover and an unemployment rate of over 2.5 million.

Source: ONS

How much should we worry about inflation? Should inflation remain the number one economic priority?

Factors to consider:

  • Is the rise temporary or is it increasing inflation expectations too?
  • Does this reflect a booming economy or cost push inflation?
  • Which is more important – Aiming for Full employment or an inflation target of 2%?
  • If we sought to reduce inflation too vigorously could we end up with deflation?

Read more at: Should We worry about inflation?


By on May 22nd, 2010

Leave a Reply

Your email address will not be published. Required fields are marked *