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Inflation Rate Jumps to 2.9%

Posted by admin under Beat Inflation, Inflation Going Up

25

Jan
Beat Inflation 
How to beat inflation

The current global economic situation seems to be taking its toll on the inflation in the UK. According to the Office of National Statistics, the annual Consumer Price Index (CPI) measure of inflation had reached 2.9% in December 2009 from 1.9% in November 2009. This rate exceeded the City’s expectations of an increase to 2.6% and the Bank of England’s forecast of about 2.7%. The Retail Price Index (RPI) reached 2.4% in December 2009, an increase from 0.3% in November 2008. This has been the highest increase in annual inflation rates from one month to the next.

The Office of National Statistics stated that the sudden increase in the CPI rate was a result of the depreciation in prices at the peak of recession. There was a significant dip in the oil prices, VAT cut to 15% and retail discounting in December 2008. Meanwhile, the biggest price increases came from the transport, clothing and footwear sectors. The CPI and RPI rates are measured based on the change in prices of goods and services bought by households in the UK, although some of these items included in RPI will not be considered by CPI.

The forecast of the Bank of England and other central banks seem to have underestimated the recent financial downturn and the sterling devaluation, since they increased the pound value and opted for ‘quantitative easing’, and a likely increase in future interest rates. This led to a four-month high in the pound value against the euro adding 1.3 cents to 1.1477, making a euro worth 87 pence.

Mervyn King, the governor of Bank of England, recently warned that there are possibilities of a distinctive increase of over 3% in the inflation rates during the first six months of 2010. He also said that this could shoot up if the energy prices and indirect taxes were to increase further. Moreover, he expressed concerns on the global economic recovery hinting that the current status may take a long time to pick up and members of the G-20 group like the US and the UK should play an effective role in restoring and stabilizing the financial economy.

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Beat Inflation 
How to beat inflation
Beat Inflation 
How to beat inflation

What will make inflation go up?

Posted by admin under Inflation Going Up

19

Oct
Beat Inflation 
How to beat inflation

A continuous increase in the current prices of goods and services at a faster pace will automatically lead to inflation. This results in the decrease of the purchasing power or devaluing of the currency. When the strong demand for goods and services by people who have enough money to buy them exceeds the supply for the same, this brings about an increase in the rate of inflation. The excessive printing of money by the government to deal with a crisis (demand-pull) and federal taxes could also be significant factors that lead to a rise in inflation.

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Beat Inflation 
How to beat inflation
Beat Inflation 
How to beat inflation

What Happens if inflation goes up?

Posted by admin under Beat Inflation, Inflation Going Up

19

Oct
Beat Inflation 
How to beat inflation

When inflation goes up, it means trouble and hence governments or central banks tend to make amends by increasing interest rates, thereby making it difficult of people to borrow money. This could turn out to be a threat for those who depend completely on their savings, with an increase in the interest rates and mortgage rates, thus increasing their monthly repayments. This would mean lesser access to money, therefore leading to lesser purchases made by people. However, when this measure is in place, it means that the economy is slowing down, which in turn means there is less work for people, creating unemployment like the recent economic downturn.

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Beat Inflation 
How to beat inflation
Beat Inflation 
How to beat inflation
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