MPG predicts 5% inflation in 2017

Ryan Bembridge

January 3, 2017

Asset manager Managing Partners Group (MPG) has predicted UK inflation rising by 5% in 2017.

It said economic recovery combined with rises in interest rates and commodity prices will generate greater borrowing and utility costs and spur wage-push inflation by up to 5%.

It similarly predicted a 5% rise in the US and between 2.5% and 3.0% in the Eurozone.

Jeremy Leach, chief executive officer at MPG, said: “Reflation is expected to be a strong theme in the US in President Trump’s first year and the Fed rate will likely rise in response to 1.25% by the end of 2017.

“While inflation is usually viewed as the nemesis of central banks, it will actually be a welcome solution for reducing the real value of the enormous debt in Europe.”

However he felt stock markets could prove vulnerable in Europe, adding: “It is likely that that there will be a significant event in 2017 that will knock markets.

“This could be an economic event or maybe a shock from the elections in Germany, France and the Netherlands.

“Once again, investors will be looking for assets offering steady income, so short-term debt and asset-backed securities (ABSs) offering 5-6% over three to five-year terms will be attractive because of the inflation-proof returns that they offer.”

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