Is deflation the real threat to investors' portfolios?

DEFLATION

Despite a small drop in inflation last week, the rate is still way ahead of target at 5%. So why are industry experts warning about a deflationary environment? Maria Merricks and Joanna Faith report.

Inflation has been a prevailing theme for UK investors for almost two years, with the rate overshooting the Bank of England’s 2% target for the past 23 months. UK CPI had been steadily rising since June, until it eventually broke through the 5% barrier in September, reaching 5.2% – its highest level since September 2008. However, there was some light relief in October when it fell back slightly to 5%. Now this trend of taming inflation is expected to continue, prompting some to suggest we are headed for a prolonged period of disinflation, perhaps culminating in a scenario of deflation...