Debt consolidation may be easier as inflation tipped to fall

A former captain of industry has predicted the current rate of inflation will soon start to slip back – something that could make it easier for people…

A former captain of industry has predicted the current rate of inflation will soon start to slip back – something that could make it easier for people to carry out debt consolidation efforts.

Former director general of the Confederation of British Industry Sir Richard Lambert said: "There is every reason to hope that inflation will pass the peak at the turn of the year and decelerate fairly rapidly thereafter.

"Once the impact of the VAT increase and these supersonic energy price increases have passed through the system, I think we will see the numbers settling down."

Sir Richard said that once this has happened, the Bank of England may help bolster economic growth by increasing the level of quantitative easing (QE), which he said could be carried out without adding much to inflation.

This would be more effective than any new government schemes aimed at boosting the economy, which he said would be "moderately helpful" without having a huge impact.

The expert suggested the outlook will be for matters to improve and get brighter if there is more QE, although it would still take some time for the feel-good factor to return and consumer spending will remain subdued in the short-term.

Minutes of the Bank of England's Monetary Policy Committee meeting earlier this month revealed that of the nine members, only Adam Posen voted for an extension of the QE scheme, calling for it to rise from £200 billion to £250 billion.

However, it also noted that some others agreed that if the current economic weakness persists, there may be a strong case for further asset purchases.

By Joe White
 

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