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Opinion

The other inflation problem

The other inflation problem
October 15, 2013
The other inflation problem

At 2.7 per cent, inflation is bang in line with its average rate over the last 10 years. The reason why real wages - and real incomes for savers! - have fallen isn't that prices have behaved unusually. It's that the legacy of the recession - mass unemployment and low interest rates - is depressing incomes. Ed Miliband says we have a cost of living crisis, but it would be more accurate to say we have a real incomes crisis.

However, we do have - and will have - a problem with prices. But it's a problem of relative prices, more than the absolute price level.

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