Headline inflation rises to 3.4%
Headline inflation in the UK increased to 3.4% in March with rising fuel costs and a weaker currency said to be behind the 0.6% increase on February. When you consider analysts had expected a figure to be around 3.1% this is something of a blow for the recovery of the UK economy but there are hopes it may be short lived if the price of fuel falls back in the short to medium term.
The economic recovery is proving to be something of a double edged sword as the government tries to encourage further lending from UK banks whilst looking to control the devil which is inflation. As we have mentioned on numerous occasions, it is a very difficult balancing act trying to increase the amount of liquidity in the money markets while also looking to keep control of inflation, as well as keeping one eye on the currency. Even though inflation has increased to 3.4% (with core inflation, stripping out many volatile elements, also increasing from 2.8% to 3%) more emphasis must be put on increasing liquidity in the UK marketplace.
Fears that the UK economic revival is somewhat fragile are starting to emerge again and could hit Gordon Brown further as we march towards the next general election.
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