Inflation fall to make debt management easier?

The task of debt management has been made harder for many by the rise in inflation, but a leading businessman has predicted this will fall back next year, based on his company's own data.

Chairman of Next Lord Wolfson said Bank of England governor Mervyn King's prediction of a fall in the Consumer Prices Index (CPI) rate in the months ahead is likely to be fulfilled.

He explained that the rise in the cost of living has been caused by "imported" factors that have led to prices rising even as wages have remained low in Britain.

"Looking at our own prices we have had to put our prices up this year as a result of rising commodity prices and rising wages in the Far East."

He added: "We know because we have already started buying products for next year, that our prices aren't going to go up next year."

Such news may be encouraging for British consumers, who might find it easier to set about the task of debt consolidation next year, although any double-dip recession could jeopardise this.

Lord Wolfson suggested the rise in the cost of commodities was down to the large-scale investment in commodities by those who have had money but not had many other safe options amid the turmoil in the world economy.

The Bank of England has persistently predicted CPI would reach five per cent this year and then drop, a view reinforced by Mr King in a speech this week to the Institute of Directors in Liverpool.

He said the cost of living rise is now "at, or close to, the peak", suggesting the significant drop-off in prices seen after CPI rose above 5.2 per cent in 2008 is set to be seen again.

By Joe White