Mervyn King defends UK inflation rate
Mervyn King, the governor of the Bank of England, has today defended the rate of inflation in the UK suggesting that one of factors are the reason why UK inflation is currently standing at 3.1%. While there is no doubt one off factors have come into play to keep the rate of inflation higher than expected, the Bank of England has now changed its target to get inflation back under 2% to a maximum of two years. So does this mean that UK interest rates will rise in short to medium term?
Despite the fact that inflation is at a relatively uncomfortable 3.1% there is little likelihood of UK base rates rising in the short to medium term to combat this particular threat. It also seems that the UK government is comfortable with this stance with economic prosperity coming well above the potential threat of inflation. Quite how the Bank of England has got its "inflation forecast" so wrong is open to debate but there will be many questions asked in the medium to longer term.
However, all parties at the moment seem to be pulling in the same direction and looking to revive the UK economy rather than fight over specific issues at this point in time.
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