Could the fear of inflation lead to a self-fulfilling prophecy?
Over the last few weeks it has become apparent that many experts fear inflation could be the potential fly in the ointment which could derail the UK economic recovery. A report by the Bank of England recently confirmed that consumers and business leaders in the UK believe that inflation is set to rise yet further in the short-term which could force the Bank of England to increase UK base rates against its better judgment.
There are a number of external factors out of the control of the Bank of England and the UK government which are influencing inflation and will continue to influence it for some time to come. Pushing UK base rates higher would reduce credit and liquidity in the money markets and would also reduce demand and pressure on prices. This comes at a time when the UK economy is crying out for all the help it can get and a reduction in liquidity and credit is the last thing needed at the moment.
It will be interesting to see whether the doomsday scenario of higher inflation and higher base rates does actually come to fruition because this could actually push the UK economy back into a deep and damaging recession.
Share this..
Related stories
UK inflation slightly weaker in May
The rate of inflation in the UK fell from 3.7% in April to 3.4% in May which was better than analyst expectations of the 3.5% figure for the month. Even though the rate is still some way off the Bank of England's 2% target it is a step in the right direction and many believe we are now heading towards a downward path with regards to inflation. So is this the end of our worries? While the reduct...
Read MoreAndrew Sentance repeats call for UK rate rise
Andrew Sentance has again repeated his call for an increase in UK base rates with concerns regarding the strength of inflation in the UK. Despite the fact he is outnumbered, as the sole MPC member in favour of a UK base rate rise at this stage of the economic cycle, he continues to repeat his thoughts and hopes for the future. So is Andrew Sentance right? While there's no doubt that if inflatio...
Read MoreLand of Leather goes into administration
Leading furniture retailer land of leather has been forced to call in the administrators as the group succumbs to the very difficult trading conditions in the UK. While there have been concerns just recently that some of the better-known furniture retailers in the UK were struggling, the collapse of the Land of Leather has caught many by surprise. However, the 109 store chain has already received...
Read MoreAlex Salmond plays a dangerous game with Diageo
Fresh from defeat in saving the Diageo Kilmarnock plant, Alex Salmond, leader of the Scottish executive, has today attacked Diageo claiming that the company "cannot just walk away" from the problems the planned closure will cause in the area. However, this is a very high-risk strategy when you consider that Diageo still employs over 4000 people in Scotland and still remains one of the largest empl...
Read MoreEaster helps March retail sales
A strong Easter and good weather proved a welcome boost to British retailers in March, according to the British Retail Consortium's (BRC) retail sales monitor.Published in conjunction with accountancy firm KPMG, the monitor shows a 3.9 per cent like-for-like increase on sales in March 2006 and a total volume sales increase of 6.2 per cent.Analysts have pointed out that this unusually large growth...
Read More