Bank of England sees no threat from inflation
The Bank of England has today issued a report suggesting that UK inflation will fall back to 1.4% over the next two years and UK base rates could remain at 0.5% for a prolonged period of time. The Bank of England believes that there is downside pressure on the UK economy if UK base rates are increased in the short-term and the risk of inflation appears to have been blown out of all proportion. But is this correct?
There's no doubt that inflation has become a problem over the last few months with commodity prices playing a major role in upwards pricing pressure. The price of oil has had a major impact on the cost of goods available across the UK and unless we see downward pressure in the short-term, consumers and businesses will be squeezed from both sides. Despite assurances from the Bank of England that the risk of inflation is not as great as many would have you believe we still need to be very careful.
The UK economic recovery is still very much on a knife edge and confidence in the marketplace is still very fragile. The incoming government needs to attack the budget deficit, continue to invest in the economy and improve the prospects for the UK in the short, medium and longer term.
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