75 Years of Inflation – what can we learn?
As the cost of living increases drastically we can look back at previous inflation data to help analyse the current economic situation. ICAEW have created an interactive graph that we can use for this.
The UK is currently facing a 40 year high level of inflation. This is down to various factors; the pandemic, Brexit and the Russia-Ukraine war which have caused increased costs of fuel, supply chain shortages along with staff shortages. This is likely to lead to a recession.
The interactive graph from ICAEW is based on data from the Office of National Statistics and dates back to January 1950. It includes indications of different economic milestones which have effected cost of living and caused recessions. The graph then extends to January 2025, predicting the inflation rate.
Inflation Through the Autumn Months
It’s predicted that inflation will continue to surge through October 2022 with rising energy costs. Although, with the newly appointed prime minister, the people of the UK were very relieved to be informed about the price cap on energy bills up to 2024.
Inflation could still be up 11% year on year, this is an increase compared to the summer months of 9%. The Russian invasion has caused supply chain issues which may mean it takes longer than predicted to get back down to the 2% target from the Bank of England.
Rebuilding Supply Chans to Reduce Inflation
Suren Thiru from ICAEW believes that encouraging economic growth by supporting financially stretched households and giving organisations some financial headroom to be able to cap prices is the way forward.
Changes to government policies to address the supply issues would be the best way to reduce inflation. This could include more flexible working patterns and temporary Visas for the areas where we are lacking skills and labour.
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