World Economies Failing To Get A Grip On Inflation
There’s a mixed bag of results for inflation in the UK, Europe and America, according to the latest figures.
For many it’s good news with the prospect of an improving economy but for others, and that includes the UK, the future is looking a little less bright.
Savers and investors also face a struggle since one option increasingly being discussed is cutting interest rates further or increasing quantitative easing.
In Britain, inflation has remained at 2.8% for March with a number of factors blamed, including a 5.8% increase in the cost of car insurance, though this was offset by lower rises in fuel prices.
Other reasons given include price rises for things like newspapers, stationery, books and audio-visual equipment.
Pay cuts
Inflation has doggedly remained over the 2% target set and was 2.7% for four months and then 2.8% for February and March.
The issue for British consumers is that economists are now predicting that inflation will hit 3% by the summer and potentially rise to 3.5% in the months ahead, which means another interest rate cut is likely to avoid economic downturn.
Another issue is that wage settlements are around 1% which means that workers are settling for a pay cut in real terms.
It’s a different story in Europe, however, where inflation pressures continue to ease with the headline rate now falling to 1.7% from 1.8% in February for the Eurozone, which is the lowest level since August 2010.
Figures from Eurostat, the European Union’s statistics body, point to a downward trend in energy prices for the fall, and the new figure is still below the 2% target set by the European Central Bank.
The inflation figure for the European Union as a whole is down to 1.9%. A year ago the rate was 2.7%.
Lower interest rates
Europe’s central bankers may be forced to lower interest rates to help ease inflation and boost the weak Eurozone economy which is still facing issues with slow growth and a deepening downturn.
However, the figures for the European Union mask a wide variety of inflation rates among its member countries.
For instance, in debt-ridden Greece the rate is now a deflationary -0.2% while in the Netherlands it is 3.2% and Hungary it is 4.9%.
Across the Atlantic, many economists and business leaders are hoping that the US economic upturn will continue.
However, their figures do not make for inspired reading, with inflation running at 1.3%, according to the Fed’s choice of inflationary measure which is the Personal Consumption Expenditures or PCE rate.
There’s also a 2% target set in the US and there is talk of cutting the interest rates to help boost manufacturing and consumer confidence.
