RPI

The Chancellor is on a collision course with bond markets over plans to change how inflation is calculated.

Welcome back! 2013 is upon us and no doubt there will be many serious conversations with clients about ‘what to expect' from the New Year.

The UK's main inflation rate has fallen to 2.2% in September from 2.5% in August, dropping to its lowest level for three years.

The Office for National Statistics has proposed a new inflation measure to replace the Consumer Prices Index (CPI) which would include housing costs in the calculation.

Inflation in the UK dropped in April, beating the consensus forecast.

BONDS

Bond heavyweights have begun shorting UK gilts ahead of an expected correction, warning yields have reached ‘extreme' lows.

Investors have come under increased pressure to inflation-proof their portfolios as a fresh spike in CPI and RPI raised doubts levels will drop back to the Bank of England's 2% target in 2012.

The UK has spent the last few days discussing how to pay for retirement and old age.

Andy Weir, the manager of Fidelity's Global Inflation Linked Bond fund, has said he expects inflation to peak below 5% later this year, after the official reading for May showed price rises had halted.