Directors expect inflation to double

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INFLATION is likely to more than double from its current rate of 1.2 per cent in the next 12 months, senior executives believe.

A survey of top business people by the Institute of Directors showed that more than half expect the annual rate of price increases to be between 3 and 5 per cent in a year's time. Just over one in 10 expect a rate of over 5 per cent.

The current low rate, which saw the price level fall last month, is expected to be reflected in high street spending figures released on Wednesday. Last month saw the biggest falls in clothing and household goods prices for the time of year since the 1950s. Economists believe this should have lifted retail sales volume by 0.3 per cent in June, reversing a 0.2 per cent fall the previous month.

The IoD survey backs up the Bank of England's view that the Government has not yet convinced the public and the financial markets that it is serious about controlling inflation long term. Last month's 1.2 per cent was unexpectedly low, but most economists expect the rate to creep up.