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MPC member talks about problem of inflation

Spencer Dale, a member of the MPC, has today stepped out to defend the UK banks policy in relation to the UK economy at the moment. Like so many other members of the MPC he is immediately concerned about the strength of the UK economy and the need to introduce fiscal stimulus programs to kick-start businesses again. However, he has also questioned the threat of inflation which many people had written off just four weeks ago as a "busted flush". So what is the outlook for the UK economy in the short-term?

One of the main problems for the Bank of England MPC is the fact that in some areas price rises have decoupled from overall economic strength thereby forcing the bank to keep one eye on inflation, which could lead to interest rate rises, while looking at fiscal stimulus programs which would at worst see UK base rates remain static. These two scenarios are very much at opposite ends of the spectrum and are making life very difficult for the MPC and the UK government. In some ways the Bank of England can do no right for doing wrong but at some point a "risk" will need to be taken in one direction or the other.

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