November 2022
InflationWatch
03 Nov 2022
Since the pandemic, inflation has risen further and for longer than most market participants expected in many countries including the UK. Large monetary and fiscal stimulus, disruption to supply chains, and a re-orientation of demand from services to goods during the COVID-19 pandemic have all placed upwards pressure on inflation. This has latterly been exacerbated by the global supply-shock emanating from the Russia-Ukraine conflict and upwards pressure on wages from tight labour markets. How high will inflation go, and will it persist? Has the era of respectable growth rates and low inflation finally come to an end?
We have introduced “InflationWatch” to help clients assess the outlook for inflation, and we publish it quarterly. 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 stance. Further details of the indicators we use to track each factor are provided in the appendix.
If you have any questions, please get in touch.
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