Talk that inflation is dead is greatly exaggerated

According to the Office for National Statistics, the Consumer Prices Index (CPI) rose by 2.2% in April down from 2.3% in May; the Retail Prices Index (RPI) fell 1.1% in May less than the 1.2% drop in April.

David Kuo, Director at the popular financial website The Motley Fool - Fool.co.uk, says: "It is worrying that even in the midst of recession inflation is coming down at a slow rate. This is partly a result of higher taxes imposed by the Treasury in the April Budget.

"The largest upward contribution to the change in the CPI in May came from alcoholic beverages and tobacco where price increases reflected the increase in excise duty.

"It is naive not to expect more tax hikes or a reversal of previous tax cuts if the gaping hole in Britain's finances is to be plugged. Therefore, talk that inflation is dead is not only greatly exaggerated but also dangerous.

"It is vital that we continue to invest in real assets if the savings that we have put to one side is to keep pace with inflation."