Inflation at 4.7%

Recent figures have shown that inflation levels in the UK have soared even further out of control, rising from 4.4% to 4.7% for August. The government target for inflation is just 2% so the current rate of inflation is way beyond the target. The jump to 4.7% was higher than many industry officials had anticipated, according to recent reports. There is also speculation over how far inflation will keep on rising, with some senior officials predicting that it will hit 5% or beyond by the end of the year.

Soaring inflation has been a big problem in the UK for many months, and due to the rate of inflation the Monetary Policy Committee and the Bank of England has had to keep the base rate steady at 5% for the past five months despite a marked slowdown in the economy. Food and energy prices have been blamed for soaring inflation levels, and officials state that the main reason behind the increase in the rate of inflation for August was the increase in gas and electricity bills.

Officials are now speculating over whether there is likely to be a further rate cut this year due to high inflation, and one official said: “Given the Bank’s caution, it does suggest that they are not particularly keen to loosen monetary policy just yet and that it would take some severe financial market problems or a major downward revision to the activity outlook to get them to move rates in October or even November.”

Industry groups such as the British Chambers of Commerce are, however, still urging the government to take swift action over interest rate cuts due to the imminent recession, and a spokesperson for the BCC said: “As the global financial crisis worsens, there is an urgent need to act promptly, in order to counter severe threats of recession.”

Tags: marked slowdown, base rate, Monetary Policy Committee, current rate, inflation