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UK inflation is currently caused by expectations of inflation post Brexit, says Economics expert

Abhinay Muthoo is a Professor of Economics in the Department of Economics. He is also the Dean of Warwick in London and Co-Director of the Warwick Policy Lab at the University of Warwick. He comments today on the inflation rate rise to 0.6% up from 0.5% in June. He said:

“The inflation rate rose in July – 0.6%, up from 0.5% in June. I am not really surprised by this increase. A main cause is higher food and fuel prices, and this is turn has been caused by a weaker pound which has raised the cost of imports. The pound was at a three year low last month, against the euro and the US dollar. Now these facts are the consequence of just the Brexit vote, not Brexit itself which is yet to happen – so due to expectations by the markets, consumers and firms. Current Inflation is in part caused by expectations of inflation! I expect inflation will rise further over the coming period for these reasons – and could even exceed the 2% target of Bank of England by early next year.”