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Can the UK government control factory price inflation?

Last week's revelation that producer prices are now rising at the fastest rate for 14 months has made many people think again about the potential threat of inflation. While the Bank of England and the UK government appear happy that inflation will fall back in the short to medium term there is concern that renewed pressure on the UK currency will increase the cost of producing goods in the UK and eventually push consumer prices higher.

This is a very complex economic situation for the UK government and the Bank of England to navigate through because on one hand there is a need to increase liquidity in the market place while on the other there is a need to ensure that prices and demand do not push too far ahead in the short term. Finding his balance, as we have mentioned on numerous occasions, could prove to be the focal point of Gordon Brown's election campaign although he would appear to be running out of time if inflation does make another push forward.

In many ways the UK economy has been taking two steps forward and one step backwards over the last few weeks but many are just relieved that progress appears to have been made, at least in the short term.

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