When is a temporary spike in inflation permanent?
The Bank of England was again forced to write to the Chancellor of the Exchequer George Osborne to explain why the UK rate of inflation is still well in excess of the Bank's 2% target. The rate currently stands at 3.1% which is a small reduction on the June figure of 3.2% but when is a temporary spike in inflation permanent?
The Bank of England has been claiming that the "short-term spike" in inflation was no danger for the last three years. First we had the reduction in sterling which was feeding inflation, then we had a short-term spike in the cost of utilities and now we see the price of oil continuing to rise and the price of wheat spiralling out of control after the Russian export ban. So a short-term spike in inflation is now in excess of three years in length and unlikely to fall away in the immediate future.
Inflation has been a major concern for the authorities in the past and many are now worried that it will begin to impact upon the potential recovery in the UK economy in the short to medium term. How long can the Bank of England go on ignoring the potentially enormous threat of inflation?
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