Inflation Races Ahead To 4.4%
News that inflation has risen by 0.6% between June and July has prompted many in the market to fear the worst for the UK economy. A rate of 4.4% for July is over twice the 2% target level which the Bank of England has been working to under the Labour Government and the latest rise is the largest monthly increase for over a decade. So where does inflation go from here?
While it would make a change to bring some good news to the table for a change, the problem is that inflation is set to move higher throughout the remainder of 2008. Many experts are forecasting it to brake through the 5% barrier and with a 0.6% rise in just one month, this does not seem out of the question.
The increase has put the Bank of England in a very difficult situation and one which could ultimately lose the Labour government the next election. Unable to reduce rates to help the economy for fear of fuelling inflation yet further, the Bank is also unable to increase rates to combat inflation, for fear of killing an already ailing economy stone dead. This is only the beginning of a very difficult period for the UK economy with many people and businesses having to grin and bear the pain for some time yet.
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