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Has inflation peaked?

After hitting a recent high of just over 5% the central rate of inflation in UK looks set to fall markedly after reaching a 16 year high. This more than any other factor should allow the Bank of England to reduce interest rates later this week, something which many investment markets have already factored in to the situation. This is not a time for the bank to be overly cautious and there is a need to take a brave decision on Thursday.

The weight of expectation in consumer, business and political circles has increased dramatically over the last few weeks and it would be a major shock if the bank where not to take any notice of this. If they were to surprise on the downside and leave rates unchanged this could lead to a substantial fall in the UK stock market. All areas of the UK economy are literally crying out for interest-rate reductions as severe and as soon as possible.

While the current role of interest-rates in the refloating of the UK economy is not as prominent as it has been in the past it should act as a useful fillip to consumer confidence. Let us hope that for once the Bank of England throws caution to the wind and listens to the business arena.

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