3.8% Inflation - no problems compared to the Zimbabweans
By Ben Yearsley | 25 Jul, 2008
Two contrasting reports came out last week regarding inflation. There has been much hand wringing at the Bank of England over the state of the UK economy and the fact that inflation (as measured by CPI) is at an eleven year high of 3.8%.
The RPI calculation is even worse, standing at 4.6% having risen from 4.3% in May. Although much of what is driving inflation is out of the Bank of England’s control, namely rising food and energy prices, what they are clearly concerned about is rising wage settlements that will push inflation up.
However their problems are minute compared to Zimbabwe whose inflation figures were also released this week. Their annual inflation is now standing at a staggering 2.2 million percent, a figure virtually incomprehensible. The Zimbabwe Central Bank will soon issue a $100 billion Zimbabwe dollar bank note – worth a measly US $4.
When you consider that when Zimbabwe gained independence in 1980 one Zimbabwe dollar was worth more than one US dollar you can see how inflation has raged out of control. Obviously the problems in Zimbabwe are unique to that country and although inflation might rise more in this country it is still going to be a single figure rise rather than anything worse. If you are worried about inflation, there is a way of guaranteeing a return above it, investing in National Savings Index Linked Certificates, however over the long term although there are no guarantees and the value can fall as well as rise, historically the best way to beat inflation has been to invest in equities.
