Huge Jump in UK Inflation to 3.8%
Posted by: delusional in Credit Crunch, Economy, Fantasy House Prices, News, PoliticsThe ONS reports that the CPI figure for UK inflation has jumped from 3.3% to 3.8% between May and June this year.
The is despite a slowing economy with much of the inflation being caused by the cost of hydrocarbon fuels and food. The Bank of England who’s remit it is to control inflation by setting the base interest rate seem to now be taking the position that there is ‘nothing they can do’.
Of course, if the BoE were actually doing what they profess to do and looking ‘two years ahead’ two years ago, they would have set interest rates to prevent the economy becoming overheated and we may be in less of a mess now. Unfortunately, the BoE’s own forecasts have been off-low in the past and this doesn’t fill one with a great deal of confidence.
I’d suggest that seeing as we have to buy fuels in other currencies, the correct way to reduce the cost of purchasing fuel would be to increase the BoE baserate which would have the effect of bolstering sterling. An increase in interest rates would likely have little effect on borrowing in the UK as the banks have long since detached themselves from the unrealistic baserate for private lending.
I’m still of the opinion that the long-term outside maximum projection for UK CPI inflation by the Bank of England could well be lower than the coming reality.
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