Should UK base rates move higher?
As the Bank of England readies itself for a difficult period in the history of the UK economy there are concerns that inflation may well remain fairly strong in the short to medium term with the bank of England unable to increase base rates for fear of curtailing any possible short-term economic recovery. Against this backdrop there are growing calls for UK base rates to move slightly higher in the short term to at least try and prevent "cheap money" from feeding the monster which is inflation. So will the UK base rates move higher in the short term?
It seems highly unlikely UK base rates will move higher in the foreseeable future, indeed some experts believe UK base rates could remain at 0.5% until 2014, for fear of ruining any possible economic stability in the short-term. Today we saw the Bank of England admit that inflation is not top of the agenda and economic growth, possibly at the cost of higher inflation, is more important in the short term.
This is a very different opinion to that given by the Bank of England only a few weeks ago and when you also consider the fact that a 1.1% increase in economic activity in the second quarter of 2010 may not, in the view of the Bank of England, be maintained throughout 2010, are we in for troubled times?
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