Inflation Flashes Its Sharp Teeth Against The Back Drop Of Dark Clouds Of Recession

July 18, 2008 - PRLog -- London (Longdogfinance) : During the month of June, the consumer price inflation rate touched a new high reaching 3.8 percent from its figure of 3.3 percent in May. Apart from this the surveys indicate that the housing market might be in real trouble as the householders are cutting on their spending to counter the inflationary pressures.

"The UK economy probably is slipping into recession or about to. Even so, it seems very unlikely the Monetary Policy Committee will cut rates near-term given the extent to which inflation is surging," Citigroup's Michael Saunders explained. "The MPC would probably hike rates if the economy were not anyway heading into a sharp slowdown or recession. They may yet do so," he further elaborated.

After it became autonomous in 1997, the Bank of England has had to deal with the most adverse inflationary situation because it is moving up at the fastest pace. Finance Minister Alistair Darling has appealed to the people not to push for higher wages under these circumstances, because it will only result in spiraling the wage-price index. "We cannot allow inflationary wage increases because that would mean that everyone, especially people on lower incomes, would suffer," the Finance Minister said.

Before the data was made public, Bank policymaker Andrew sentence said that in order to counterbalance the economic slowdown risks, the negativities born of high inflation need to be embedded in to the system so as to avoid further dent to the consumer confidence.

"This creates bigger upside risks for medium term inflation, and increases the possibility that a more pronounced or prolonged slowdown in the real economy will eventually be needed to bring inflation back to target," a Bank of England source had a take on the issue.

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