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UK think tank predicts inflation rally

Hardy Graupner
November 2, 2016

Inflation in Britain will rise sharply in 2017, a leading UK think tank has predicted in its latest forecast. It said the steep increase in consumer prices would come in the wake of the pound's Brexit-linked fall.

https://p.dw.com/p/2S0qV
London shoppers
Image: picture-alliance/dpa/H. Mckay

Citing a fresh report from the UK's National Institute of Economic and Social Research (NIESR), the "Financial Times" and "The Independent" said Wednesday consumer price inflation in Britain would rise to 4 percent in the second half of 2017, up from around 1 percent at the moment.

The think tank noted that there were signs of substantial impending inflationary pressure due to the almost 20-percent depreciation of the pound against the greenback since June's pro-Brexit vote in the country.

NIESR said the considerable price hike would harm households' real disposable incomes and impact gross domestic product as well as living standards in general.

Expensive shipments from abroad

"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," Simon Kirby, head of forecasting at NIESR, said in a statement.

Brexit weighs on pound

Many retailers across the UK had already warned there would be much higher inflation due to more expensive imports.

The think tank's take on inflation rate developments goes beyond that of the Bank of England, which predicted a 1.9-percent rise in inflation over the next couple of years.

But the lender made that forecast back in August and is expected to revise its outlook on Thursday when it's due to present its new quarterly inflation report.