United Kingdom: Bank of England forecasts 4-5% inflation; Unemployment rose to 7.9%16 February, 2011, 19:49. Posted by Zarathustra
Tags: Bank of England, GDP, Inflation, United Kingdom
The Bank of England Inflation Report has been published just now. The Bank of England raises the forecast for CPI inflation to 4-5% in near term and it will be above the 2% target over the coming year. The Bank attributed this to the rise in VAT, energy and import prices, and rebuilding of profit margins for companies. But the MPC still judge that downward pressure on wages and prices due to spare capacity will help to bring inflation downward. On economic growth, the Bank believes that expansionary monetary policy, global growth and weak sterling shall help the recovery despite the fact that the weather wasn’t helping last year. However, the forecast has been weaker than the last report with bigger risk to the downside. On the other side, the Office for National Statistics just released the unemployment figure, with unemployment rate rose to 7.9% in the last quarter of 2010.
Overall, what we hear today from the United Kingdom looks pretty nasty. The high unemployment rate and weaker growth forecast might support the Bank’s view that there are still spare capacity, although the persistently high inflation seems to suggest the otherwise. On the whole, it looks increasingly like a stagflation, unfortunately.
We will have another Prime Minister’s Questions in some 10 minutes. Stay in tune here if you want to know if David Cameron will be grilled by Ed Miliband on inflation and unemployment today.