The UK inflation problem
Jun 22, 2023
In the US and in Europe, disinflationary forces start to kick and there has been some relief on the inflation front since late Spring this year. There is however one noticeable exception amongst the bigger economies: the UK. Here prices continue to get hotter even when excluding fuel costs. The main reason is that Brexit contributed to labour shortages and wage inflation. Also the important mortgage financings are being refinanced by households at much higher costs. From an investment side, we believe this means lower valuations for UK equities for longer as the UK economy needs to deal with higher interest rates for longer.