August 2023
InflationWatch
04 Aug 2023
Inflation has risen further and for longer than most market participants expected in many countries, including the UK. Expansive monetary and fiscal stimulus, disruption to supply chains, and a shift in demand from services to goods during the Covid-19 pandemic all placed upwards pressure on inflation. Lately, this has been exacerbated by the global supply shock emanating from the Russia-Ukraine conflict and rising wages from tight labour markets.
We hope our InflationWatch series helps clients assess the outlook for inflation. This paper provides:
- An update on the latest position on inflation
- Consensus forecasts on future inflation rates
- Our view on whether the risks to the consensus view are tilted to the upside or downside.
We focus on the UK and the outlook over the next 2–3 years. Our primary measure of inflation is the change, year on year, in the headline Consumer Price Index (CPI). Inflation in a modern, open economy is determined by a complex set of macroeconomic factors including aggregate demand, input costs, inflation expectations and monetary policy. You’ll find full explanations of the indicators we use to track each factor on pages five and six, under ‘Decoding Inflation Indicators’.
If you have any questions on anything covered, please get in touch.
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