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While the Bank of England has faced the dilemma of how much funding assistance to give to the UK markets without allowing backs to benefit directly, this situation is now being replicated in Europe...
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Wednesday 18th June 2008
It seems as though the prospect of UK inflation hitting over 4% in the next few months is a real reality with news that the current rate has increased to 3.3%, well above the governments 2% target. This really is bad news for the UK consumer with living costs set to spiral yet higher over the coming 12 months. If the price of oil also continues to rise then we could see the problem magnified, causing utter mayhem in the UK.
The Bank of England is caught between the devil and the deep blue sea in that if it reduces interest rates inflation will move substantially higher. However, if rates are left unchanged or even increased to fight inflation then more and more consumers and businesses in the UK will fall into serious financial trouble. The issues seems to be whether to let the economy, businesses and consumers suffer in the short term and control inflation, or help consumers and tackle the potential runaway subject of inflation at a later date.
As we approach the next general election in 2 years time, there is real concern that the economy will have shown no signs of recovery when Gordon Brown is forced to go to the polls. |
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