Bank of England confident inflation will fall
Paul Tucker, the deputy governor of the Bank of England, has today reiterated the Bank of England's view that inflation will not be a problem in the short to medium term. Despite last month seeing inflation spike to 3.5%, well ahead of the government's 2% target, it seems that a number of factors could come together to bring inflation down in the short to medium term. So what are these factors?
In truth the return to a 17.5% VAT rate had an unfortunate impact upon the rate of inflation, although this is unlikely to be long-lasting, but there are issues which will release the pressure on inflation. The Bank of England also believes there is significant spare capacity in UK economy with many companies running well below capacity. As and when the economy does recover this additional capacity should be available without placing pressure on prices or wages. As a consequence, while the Bank of England is not discounting the threat of inflation, there seems to be a growing confidence that the 3.5% spike will be a short-term event.
Analysts and economist in the UK are praying that the Bank of England is correct because another bout of serious inflation could ruin the UK economy.
Share this..
Related stories
Did Gordon Brown's appearance on TV go down well?
Gordon Brown's appearance on the Piers Morgan show yesterday evening certainly cast the "iron Chancellor" in a very different light although his in-depth interview has attracted very different opinions from UK taxpayers, businesses and politicians. One issue which keeps coming to the fore is the fact that Gordon Brown has never mentioned his family in public although last night, under intense scru...
Read MoreBudget Headlines : Accountancy rules to be consolidated
Accountancy rules to be consolidated...
Read MoreWhen will the demise of sterling finally hit rock bottom?
As the UK currency continues to move lower and lower against the majority of the leading currencies of the world's there are serious concerns that we may be on the verge of a collapse in the UK pound. The currency is now at a 28 year low against a number of major currencies and with interest rates set to move lower in the short term there would appear to be little chance of a letup in the fall. So...
Read MoreWhy is Mervyn King talking down the UK currency?
As we have covered over the last couple of days, Mervyn King, the Gov of the Bank of England, has been very active in talking down the value of sterling on the worldwide currency markets. Initially there were both positive and negative comments from the Bank of England but over the last 24 hours there is no doubt that Mervyn King has turned more negative on the UK currency than ever before.
...
Drop in consumer inflation
Consumer inflation dropped to 4.5 per cent last month, according to the Office for National Statistics (ONS).The fall in the Consumer Prices Index (CPI) measurement, of 0.7 per cent compared to September, was the largest month-on-month drop in 16 years.Declining transportation costs were cited by the ONS as the main reason for the large fall."The largest downward pressure on the CPI annual rate ca...
Read More