Managing the low inflation challenge

Managing the low inflation challenge

The risks of high inflation are well known, but low inflation carries a high price too, says Simon Gergel, manager of the Merchants Trust, and head of the UK equity team at Allianz Global Investors.

The latest figures for UK inflation show the consumer price index (CPI) running at 1.2% in September, below the Bank of England's target rate of 2%. Inflation is also low in the other major economies of the world with central banks in Japan and the eurozone taking action to try to prevent deflation or falling prices. A career spent investing in the UK has programmed me to fear high inflation and the destructive impact that rising prices can have on the value of the pound in my pocket. But are we better off with low inflation? The ‘Goldilocks' level Academic evidence seems to point to...