Inflation is on the rise again in the UK - the CPI rose to 5.2% from 4.6% last month, and RPI rose from 5.2% to 5.6%. Click here for Office of National Statistics figures.
Inflation diminishes real income, savings, and investments. It can be particularly hard for the less affluent members of society. However, inflation usually benefits those who have large amounts of debt as it reduces the real value of their loan.
So what are the prospects for future inflation? In my opinion, with another round of Quantitative Easing on the cards (see previous post), inflation can only get higher. Indeed, with such high government debts, higher inflation may be in the self-interest of debt-laden Western democracies. In effect, inflation can be viewed as a partial default on government debt.