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Could UK base rates rise significantly in the medium term?

A member of the Bank of England MPC committee has gone on record as suggesting UK base rates could rise rapidly as and when the UK economy begins to recover. There are serious concerns regarding the potential damage which inflation could inflict upon the UK economy if it is left unchecked as the economy starts to turn round in the future. Kate Barker, the MPC member in question, believes that UK base rates could fall further in the short term but she has also warned of a significant increase in the future.

The UK government has reached something of a crossroads by introducing quantitative easing to the mix because if it is successful and the UK economy does turn around, we could see inflation running out of control in the short to medium term. However, if the quantitative easing policy fails to turn the economy around we could see a bout of deflation in the UK which would have serious consequences for the medium to long-term performance of the UK economy.

As we have suggested a number of occasions, the UK government is very much in the last chance saloon and any errors made from here on could have a significant impact upon the timing of any recovery in the UK economy.

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