Research Briefing | Jun 22, 2021

UK | Inflation risks rise, but counter forces should prevail

Technical factors will push inflation up in the short-term and the fallout from the pandemic will raise inflation risks further out. But on balance we think a mix of the stronger pound, a persistent output gap, and more fundamental forces point against the UK entering a new era of sustained higher inflation.

Comparisons with a depressed 2020 and the end of the temporary VAT cut for hospitality will mechanically raise inflation this year. And were consumers to spend a bigger-than-expected share of savings, combined with the recent surge in money growth, that rise could continue for longer than we expect.

The pandemic’s repercussions could result in persistent upward pressure on prices. But the stability of inflation over the last 30 years and the effect of this on expectations is a major counter. Equally, the institutions and labour and product markets which facilitated high inflation in the past are lacking.

Back to Resource Hub

Related Services

Post

Long term investors well placed for office upswing in Australia

Australian CBD office property capital values have taken a battering since mid-2022, falling by an average 18% for prime assets. In the process, capital values have fallen below replacement cost in many markets, which is constraining new commencements.

Find Out More

Post

Housing policy outlook clears after Federal Election in Australia

Saturday's Federal Election decisively delivered a second term for the Albanese government, clearing up the policy outlook.

Find Out More