IoD Reaction to Inflation figures

Dated: 14 June 2011

Commenting on the latest inflation numbers which showed CPI unchanged in at 4.5%, Graeme Leach, Chief Economist at the Institute of Directors said:

“Clearly we still have a short-term inflation problem but the medium term threat is deflation, owing to the contraction in the money supply. There was a lot of upward and downward movement within the latest CPI figures but the overall story hasn’t changed. Economic weakness, spare capacity, slow wage growth, VAT effects and anaemic money supply all suggest that inflation will fall back very sharply in 2012.”

He added:

“The softening in the economy already underway is sufficient to bring inflation under control, we do not need a tightening in monetary policy. Indeed if current money supply trends continue we will need to introduce QE2.”

ENDS

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Edwin Morgan
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Email: edwin.morgan@iod.com
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Notes to editors

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