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 reduction to 3.4% is obviously very welcome, especially in the current economic climate, we still need to be wary of the threat of inflation which has not disappeared as yet. Mistakes have been made in the past where inflation and other potential threats were written off only to return with a vengeance and cause major problems for the UK economy. The Bank of England has always suggested that the rate of inflation would fall back in the second half of 2010 and 2011 although some analysts had begun to question this forecast.
The reduction in UK inflation will release some of the pressure on the Bank of England to increase UK base rates in the short to medium term. We can now breathe a sigh of relief for the moment!
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