What's going on?

Market inflation in the U.S., UK and EU is rising slightly and deflation is slowing, which is a positive step on the road to economic recovery. One driver is the European Central Bank quantitative easing program in which the bank creates money and buys bonds. Increased job growth rates in the U.S. and U.K. leading to an expected wage increase may also be a contributing factor to the rise in inflation. Lastly, stabilizing oil prices around $45-60 has made inflation products more attractive to potential investors.

What does this mean?

The previous drop in inflation was partially caused by lower than expected worldwide oil prices, which have hit record low prices this year. Now that oil prices have stabilized, inflation is set to increase with deflation decreasing. The result of previously low inflation is that consumer spending is increasing as prices are lower in stores. Furthermore, since the quantitative easing programs began inflation in the Eurozone has increased from a low of 1.5% to 1.7%. Expectations that inflation will continue to rise in the next five years are strong signs of support that the government�s economic stimulation policies are working. One risk to the view that inflation is poised to rise is the strength of the U.S. dollar, which has kept inflation low in the U.S. as it has continued to gain in value.

Why should I care?

Declining deflation and slightly rising inflation are good news for consumers, increasing consumer spending and spurring economic growth at a time when wage growth remains weak. Unemployment is also down in the EU and U.S., good news for residents. An investment opportunity would be to buy the euro or pound on currency trading exchanges, since if inflation rates rise it will potentially drive up the currency. Another investment opportunity would be in British oil stocks, which are very low at the moment due to the low price of oil. If the price of oil does rise in the next year those stocks will probably rise as well.