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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Sep 05 2013

Obstacles Remain for U.K. Inflation’s Return to Target

ECRI has just updated its United Kingdom Future Inflation Gauge (UKFIG). The value of this forward-looking gauge lies in its ability to predict cyclical turns in U.K. inflation.

Now that CPI inflation has ticked down to 2.8% and has remained below 3% for more than a year, the consensus is hoping that inflation is finally headed back toward the Bank of England’s (BoE) 2% target. However, obstacles remain as the government’s Help to Buy and Funding for Lending programs, both designed to boost loans, are increasingly seen as fueling the rise in home prices and potentially creating a housing bubble.

The latest update to the UKFIG clarifies the future trajectory of U.K. inflation, indicating whether U.K. inflation can overcome the headwinds pushing against a return to the BoE’s target.