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Interest Rates Are Stuck At 5%

Today has been a disaster for the UK economy, the government, the Bank of England and above all the UK consumer. As inflation bounds ahead to a frightening 4.4% the likelihood of interest rates falling in the short term is as remote as it ever has been. A fall in interest rates would assist the economy but fuel inflation, but a rise in rates would combat inflation but kill the economy.

The sad fact is that the Bank of England is stuck between a rock and a hard place with no room for manoeuvre. As different factions of the UK economy call for different actions on interest rates it seems inevitable that they will not move for the foreseeable future. While to the outsider it looks as though the Bank is sitting on the fence, there really is no alternative.

The only way that this economic slowdown (a recession by any other name) will end is after a great deal of pain for both consumers and businesses. The key to the whole situation is inflation but until this shows signs of slowing the pain will grow and grow. The UK is not the only country in Europe suffering from this scenario but there really is no magic wand which can be waved to make it all go away.

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