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Cost of living on the rise

Inflation heading for ‘rapid rise’ in 2017

Money - own picInflation is expected to peak at 4% next year as a result of the falling pound, according to a think tank.

The National Institute for Economic and Social Research says weak sterling will make imports more expensive and cut consumer spending.

It expects prices to rise rapidly during the year as sterling remains at around $1.22 and €1.11 this year and next.

Simon Kirby, head of macroeconomic modelling and forecasting at NIESR said sterling’s depreciation was the “most striking feature of the post-referendum economic landscape” and it would “pass through into consumer prices over the coming months”.

He added: “While we expect this to be only a temporary phenomenon, it will nonetheless weigh on the purchasing power of consumers over the next couple of years.”

CPI hit 1% in September, from 0.6% in August .

The Bank of England will publish its inflation report on Thursday and is expected to raise its own forecasts.

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