In message , Mark
writes
On Tue, 19 Jan 2010 13:13:06 +0000, Paul Harris

The rate for December was 2.9 against a City predicted rate of 2.6 this
is against the falling price of oil a year ago and the cut in VAT that
took place at that time. There will be some concern that the rate was
above prediction but they are unlikely to act at this time as a rise in
interest rates would be counter productive in other areas such as the
building industry. The target is 2% if it stays above that level or
increases then they may have to consider taking action.

I think it unlikely that interest rates will rise while quantative
easing is still continuing. That really would be crazy.

It would be but they have returned VAT to 17.5% at a time when they are
still trying to stimulate the economy.

The BoE predicted than inflation will rise in the short term and fall
back later this year. In this case it is unlikely that interest rates
will rise soon.

The outcome of the general election could change all this though.

Good points, the Country is deep in debt and needs to reduce borrowing
which is going to be a long and painful process but it still looks like
inflation could go above 3% in the short term and rise further still in
the first half of the year which is not something Brown will want to see
happen. It will be a difficult balance but I doubt we will see any
major steps taken if they can avoid them.

There will have to be some action after the election but with pay levels
stagnant, inflation rising and a Government that has to reduce Public
Sector borrowing looking for ways to do so we are still in for a rough
ride. The threat of inflation is still very real and coupling that with
tax increases won't go down well.
--
Paul Harris