It is clear to everyone that the cost of living has increased and will increase further since Brexit.
The fall in the pound being the main cause and the driver behind this increase in inflation and the man in the street feeling the household costs are increasing.
The Bank of England has changed its tone recently and has now become more hawkish , which means in simple terms that they will look to increase the bank lending rate . Why? Simply put the Bank of England has seen inflation increase in the last six money he to levels not seen for many years .
Inflation in the U.K. Is running at 2.9% and the Bank of England's tolerance is being pushed . Rising inflation above the BOE target of 2% puts pressure on the BOE to curb inflation and bring it back down to the target range .
Inflation has moved upwards and will move further due to the weakness of the pound . The UK has become heavily dependant on imports from food, vegetables, technology , chemicals etc that the cost of those goods in pound terms has risen .
What the pound could buy 18 months ago has gone up now by about 27%. The importers and retailers have tried to absorb much of this cost but are simply unable to continue absorbing this extra costs and so , are passing this onto the consumer . This means thatvroices are rinsing , which means the costs of goods is rising and so inflation Rises.
What about the pound £
Well here is the funny thing .
The pound will surely rise and become stronger on the sniff or smell that interest rates may rise in the U.K. . This is due to the pound becoming more attractive as a currency to invest in and the banks will benefit further from a high deposit environment .
As the pound gets stronger then the cost of imports per se flies down and then inflation should weaken.
This is the theory .