Is the UK inflation rate now too high?

It was recently announced that the UK inflation rate has risen to 3.1% for November 2017. Which is now a figure as high as seen 6 years ago, which was around the time of the recovery stage following the 2008 global economic recession.

Baring in mind that the Bank of England inflation target is around 2%, to answer the title question, yes, the current inflation rate is too high. Especially, when considering the fact that the inflation rate has pretty much tripled this year alone, compared to only around a 1% rise in the year before.

Why has it risen so much?

Well, basic theory would tell me that there is a surge in aggregate demand within the economy. Which is true, especially given the fact that last month, the UK interest rate had been decreased to 0.25% from 0.5% which would therefore increase consumer spending and allow people to obtain cheaper loans.

Is this a problem?


Figures like these are not uncommon, especially looking at the historically high inflation figures in the 70’s and 80’s. A high inflation rate within the UK isn’t an uncommon sight and the reality is that the 2% target is essentially unattainable in the long term.

However, the real issue doesn’t lie in price increases, it’s the fact that the wages have not increased at the same rate. THIS is the major problem that we face, especially approaching the festive part of the year.



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