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David Miles warns of threat of inflation

David Miles, a member of the MPC, has today been discussing the threat of inflation in the UK and the fact that with the economy is on a knife edge and inflation could be out of control for many years to come. Despite assurances from the Bank of England and the UK government the rate of inflation has remained stubbornly high and is likely to remain so for the foreseeable future. However, normally we would see interest rates increased to offset the threat of inflation but with the economy on the verge of a potential double-dip recession there is no way the Bank of England can afford to strangle money supply to the UK business arena and consumers.

As we have covered on numerous occasions, the combined threats of a reduction in economic output purely and simply because of the current situation in the UK and around the world, not to mention spending cuts to be introduced by the UK government, as well as a renewed strength in the rate of inflation are at very opposite ends of the spectrum. The UK government and the Bank of England need to concentrate upon refloating the UK economy in the short term and effectively leave inflation until a later date. But what will the rate of inflation be and what damage will it have caused by the time the authorities are able to get round to tackling this issue?

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