Inflation Drops Below Bank Of England Target

As the Bank of England reports inflation in Britain has dropped below the 2% target for the first time in four years.

The Consumer Price Index – the Bank’s inflation measure – fell to 1.9% in January from 2% in December.

The Bank’s target for inflation has been 2% for several years and has reached as high as almost triple the target ion that time.

Overall, Britain is following a global trend of falling inflation, and with the World Bank predicting commodity prices, like food and fuel, falling further this year, the cost of living index is likely to drop further.

However, not every country is seeing living expenses fall and price rises, especially in the energy sector, are still working through the system in Britain, the US and many Western economies.

Poor economic controls

Many other countries are seeing mixed inflation results.

The government in economically stricken Argentina has finally published realistic inflation figures after failing to tell the truth for many months.

The official figure is around 11% – but the year on year figure is more like 28% and some analysts put the number as high as 44%, according to expat financial research firm ECA.

Also in South America, Venezuela is trying to tackle soaring inflation which is running at around 56%, while the worst performer is probably Syria. Embroiled in a bitter civil war and human rights atrocities, the cost of living has surged by 68% in the past 12 months.

Sudan is also victim of high prices after the nation was partitioned and fighting between rival political factions continues. Inflation is around 42% a year.

The outlook for all these nations is poor as the underlying factors pushing up prices are still in place and inflation is expected to keep rising along with the political temperature.

Cost of living under control

Iran and Malawi have inflation around between 30% and 40%, but the economies are stable and the figures are beginning to fall.

Currency depreciation is the main cause of raging inflation in many countries – mainly as the result of political uncertainty and poor economic management by governments.

The jury is still out in Japan, where the government’s controversial Abenomics policy is yet to show any real dividends. Devaluing the Yen against competing currencies was aimed at making exports cheaper to generate output and more jobs.

However, the unions are undercutting the policy by demanding large pay rises which stoke inflation and undermine the policy.

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