The lack of inflation and the possibility of deflation has been the focus of central banks around the world as they cut interest rates and then embarked on non-conventional monetary policy such as quantitative easing in an attempt to stimulate growth and push prices higher.
However, inflation is seemingly at an inflection point. The word ‘deflation’ may exit the financial lexicon over the coming months as commodity prices stabilise and global excess capacity is slowly reduced, and investors position for modestly higher rates of inflation.
Inflation in both the UK and the US has reached the highest rates in almost two years at 1.0% and 1.5% year-over-year respectively. In the US economy the rise in the price of oil over the last year is filtering through into higher energy costs, meanwhile the UK inflation rate got an additional boost from the tumbling value of the pound.
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