Friday, August 13, 2010

Inflation Uncertainty

Inflation in US. Inflation in UK is much higher at over 3.0%

Economies such as the EU and US are experiencing disinflation (disinflation means a fall in the rate of inflation, prices rising at a slower rate) - perilously close to deflation. The UK, by contrast has seen unexpectedly high inflation given state of economy.

Theoretically, you would expect a fall in inflation given the UK economic situation. But, for various reasons this has not materialised.

Evidence suggests that with commodity prices again rising, we could again be facing a rise in cost push inflation.

This is a look at why inflation should fall with a spare capacity and why this has not occured in UK.

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