The Spectre Of High Inflation May Soon Return To Haunt Us

Inflation, as Ronald Reagan once said, “is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man”. But who remembers that now, or even understands what the former US President meant?

- Ross Clark

You have to be in your mid-fifties to remember when we had an inflation rate of over 20 per cent. The destructive power on people’s savings, and the distortion it can cause in the economy, are lost on most people who have lived their adult lives in times of stable money.

But it might not be long before we get a sharp reminder of what inflation does to society. Amid the fretting over the Indian variant this week, the Consumer Price Index – the official inflation rate – more than doubled to 1.5 per cent.

If it stayed at that level, below the Bank of England’s two per cent target rate, it would not be a problem. Yet there is every reason to fear this is just the beginning.

Hopefully we won’t get back to where we were in the 1970s, when the price of food in the shops used to go up week on week; unions demanded four pay rises a year just to maintain workers’ living standards; people on fixed incomes saw themselves getting rapidly poorer; and home buyers faced interest rates of 15 per cent. But it can’t be ruled out.