Inflation challenges

Source: Office for National Statistics licensed under the Open Government Licence v.1.0

Source: Office for National Statistics licensed under the Open Government Licence v.1.0

We thought these two charts prepared using recent data from the UK Office for National Statistics tell an interesting tale: unstable and possibly declining inflation over the last few years coupled with a decline in real average weekly earnings over the period since the financial crisis broke.

How best to capture this in pricing, reserving and capital models?

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