Consumer prices begin to fall

Article Abstract:

Consumer prices are falling throughout the UK, bringing cheaper manufactured and electronic goods. However inflation in the services sector is running at 3.5%, and there is a tightening labour market. A rise in pay rates is forecast, resulting in higher inflation and interest rates, which is bad for gilts. Other structural changes will offset inflationary pressures, with over the counter medicines halving in price if the Restrictive Practices Court rules against price maintenance. Cheaper financial services are emerging due to new entrants such as supermarkets, insurance companies and Virgin.

Prices, Analysis

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A global trend

Article Abstract:

World interest rates could start to rise, following a trend set by the US, according to JP Morgan and Co. Inflation could arise from stronger economic growth which is supported in European and Japan by low rates of interest. Growth will lead to more rate rises though interest rates are likely to rise gently. US rates could rise to above 6% if US economic activity is underestimated. Interest rates are not likely to be reduced in 1998 as they were in 1995, nor are rates likely to rise as sharply as they did in 1994.

Forecasts and trends, Inflation (Finance), Interest rates, Inflation (Economics)

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