Shadow Finance Minister Bob Richards has warned that Bermuda is heading towards "stagflation" — the term for a situation when inflation and economic stagnation occur at the same time.

The Opposition MP told the House of Assembly on Monday that the Island still had significant inflation — running at 5.2 percent in January, according to the latest Consumer Price Index — despite a weakening economy.

"We have inflation that's running pretty high," said Mr. Richards. "It's an unusual set of circumstances and it's something to worry about."

He said the index — which he likened to "a misery index" — showed worrying trends such as the cost of food rising by an annual rate of 8.4 percent in January, fuel and power prices increasing by 24.5 percent year on year and rent rising by 2.6 percent.

"These are very serious problems when you have inflation still very strong and the economy, and therefore job prospects, weakening at the same time," said Mr. Richards.

"It's a very difficult set of circumstances for the Bermudian people. Right now, we have a combination of two bad things: a weak economy and inflation still raging. We have the worst of both worlds at this moment."

The Shadow Minister added to his comments in a statement released yesterday, in which he said the 5.2 percent inflation rate was "a startling exception in a global economic environment in which national economies across the board are contracting while experiencing low rates of inflation".

Mr. Richards said: "The concern for Bermuda is that economic history has shown that stagflation can be very difficult to end once it gets started.

"For working Bermudians, stagflation represents a double whammy: pay cheques that are diminishing because of workplace slowdowns or even layoffs are further eroded by inflation."

He added: "If the rate of inflation does not abate in these two sectors as the economy continues to weaken, the Government may need to conduct an inquiry into the situation with a view to protecting consumers.

"We have to remain vigilant in these difficult times and be prepared to use judicious measures to protect Bermudians families feeling the brunt of the downturn."

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