[dx034]

As I wrote in my other comment, inflation at current exchange rates is forecasted to go to ~3% over the next year. That's much higher than currently, but not dangerously high for the economy.

At the same time, the volatility of exchange rates are worrying businesses, but the absolute value is probably rather positive for the economy. People will buy more local and exports are cheaper. The economy seems to hold up well and will probably continue to do so until Brexit actually happens.

To be clear, I'm absolutely no fan of Brexit, but I don't think that it will have negative effects in the next 1-2 years. In the longer term this may look very different.

[barrkel]

So, Britain has a trade deficit - so a revaluation at a lower level should be a corrective. In many ways, it's been a long time coming.

But I'm not so positive on the effects as you are. Britain's manufacturing output, the thing it's most likely able to export when it leaves the EU, has a large imported component in other materials, and the transaction costs there will be higher not just because of lower sterling.

Since Britain hasn't been able to compete effectively in manufacturing with Germany while in the EU, I find it hard to believe they'll be able to compete with China when they're out in the same seas. So I don't see a resurgence in manufacturing. Honestly, when you buy something, is British a sign of quality? For me, not in food, not in durable goods, not in almost anything.

And Britain's main export is services, which it doesn't have much in the way of trade agreements by default. So that gets screwed by Brexit too.

Personally, if Brexit goes through, I'll be leaving the country. I'm Irish living in London, and while I'll probably have working rights grandfathered in (the same way I can vote in national elections, from the history of our two countries), my 3 year plan is geared towards leaving. I'm still only 60% sure Brexit means Brexit, though.

[doc_holliday]

"inflation at current exchange rates is forecasted to go to ~3%"

I don't understand how they are calculating it to only be around 3%.

We are already noticing things to be running at around 10% in imports, and sometimes more across various things.

We import a lot in the UK; energy, food, goods.

I personally think it will be way above 3% possibly reaching double figures.

[dx034]

As was said in another comment, not everything is imported and even for imported goods, not all prices will go up by 10%.Many imports are in the agriculture sector, and the current supermarket fight means that supermarkets will try to hold back price hikes as long as possible.

Measuring inflation is tricky as it affects everyone differently. The RPI is perhaps a better measure for consumers in the UK and could go a bit higher. Perceived inflation will certainly be even higher, as most people focus on prices for groceries and petrol to measure inflation, the most affected goods.

[dogma1138]

Local food prices are also dependant on the UK being in the EU since the EU provides huge farm subsidies.

UK food prices are already fairly high even tho they are already being subsidised to match cost, many items like milk are subsidised because the supermarkets are paying below cost prices to the farmers.

That said the EU losing the UK as a trading partner won't go well either, Germany will have to find another country to sell stuff too to cover the $50 bln. loss in trade deficit if the UK implodes.

[mjohn]

There are several reasons why inflation might be lower than the rate of depreciation. For example not everything is imported, not all cost increases will be passed onto consumers and some retailers will try to recoup costs by having less sales and offers.

The CPI is also unlikely to be able to capture hidden inflation, such as using cheaper ingredients in food to offset currency depreciation.

These are just off the top of my head. Calculating inflation is complicated.