Fund boss calls for higher inflation

The head of Managing Partners Limited, a boutique fund house, has urged governments to ‘embrace inflation in order to nurture the green shoots of recovery’.

 Fund boss calls for higher inflation


The head of Managing Partners Limited, a boutique fund house, has urged governments to ‘embrace inflation in order to nurture the green shoots of recovery’.

The head of Managing Partners Limited, a boutique fund house, has urged governments to ‘embrace inflation in order to nurture the green shoots of recovery’.

In the UK, the Consumer Prices Index measure of inflation is currently running at 2.8 per cent, ahead of the official 2 per cent target.

This has caused much anxiety for savers, who lose money in real terms because even the higher interest rates on cash ISAs are closer to 2 per cent than the inflation rate.

But Jeremy Leach, chief executive of Managing Partners, has commended higher inflation because of its effects on debt. Since most debt is set as an absolute amount, inflation eases the burden in real terms.

‘We do need higher levels of inflation,’ argued Leach. ‘It needs to be controlled in the longer term but right now governments need to embrace it. When people see the real value of their debts fall and the nominal value of real assets such as property increase, then they will have confidence and the capital to start spending and investing again, which is all we need for a recovery to happen.’

Other analysts have demurred on the benefits of using inflation to eat into debts, though.

Vicky Redwood, chief UK economist at Capital Economics, has noted: ‘When inflation has been used to reduce debt in the past, it has usually happened because a government has resorted to this out of desperation and weakness, rather than because it has judged that it is in the best interest of the economy in the long term.’

Comments (0)