Is inflation a threat to the UK recovery?
This week sees a number of vital economic statistics in the UK with concerns that the rate of inflation is set to spike upwards in the early part of 2010. Recent figures have shown an increase in the cost of raw materials, much of which came from the upward movement in the price of oil, which will have an impact upon inflation. So what else do we need to monitor in the short term?
There is also concern that the government's refusal to maintain VAT at 15%, and instead return it to 17.5%, will also place further upward pressure on the cost of living in the UK. In what is becoming a more difficult scenario by the day, the Bank of England is also under pressure because of the strategy regarding UK base rates which have remained at 0.5% for some time. If inflation does begin to take off, and the Bank of England does not respond quickly enough, we could move towards a situation where the rate of inflation spirals out of control and we need to see a significant increase in base rates in a very short space of time.
The ability to increase base rates and make borrowing more expensive is a very basic tool in the economic UK government's toolbox but one which has proven very effective over the years.
Bank Of England Keeps Interest Rate At 5%
It is not surprising to see the Bank of England refrain from moving interest rates higher as the fight against both inflation and a recession continue unabated. While there were many calling for a rate reduction it seems as though the Bank of England would rather remain on the sidelines for the moment and monitor the path of inflation.
Without doubt UK interest rates would be lower...
Postal unions ramp up the pressure
Amid signs that talks between the Royal Mail and the Communication Workers Union are deadlocked, a new wave of strikes has been announced for next week. Today saw 77,000 postal workers on strike and next Friday and a week on Monday will see a total of 120,000 workers taking up the offer of industrial action. As we approach Christmas time the pressure is building on both parties but the unions appe...Read More
Do politics and economic strategies really mix?
As we mentioned in one of our earlier articles, the UK government has yet to set out a credible plan for reducing the UK budget deficit which is now at a high of £178 billion. One obvious reason why the government has not been as open about the future as it could be is simply because we are nearing a general election and the government needs the support of Labour voters across the UK. While wo...Read More
US authorities slash base rates
US authorities have tonight cut base rates from 1% down to the 0% - 0.25% in a move which few had forecast and even fewer had thought we would see. This effectively gives the US government the opportunity to flood the money markets with 0% finance at a time when the US economy is dive-bombing to recession. The move reflects a similar situation in Japan where the economy is also in a severe downwar...Read More
When did you last complain about your bank?
Even though the UK financial sector touches all areas of our lives, it seems that very few people in the UK have actually followed through with their complaints regarding financial investment, financial services and the financial sector as a whole. Recent figures from the Financial Services Authority (FSA) show that while having record complaints passed to the regulator, more and more people are h...Read More