Inflation is expected to run well above the Bank of England target rate of 2% for another two years in the UK. Don’t worry it’s a self-inflicted goal.
Moreover, Inflation is a cause for optimism says Bank of England governor Mervyn King.
The UK inflation rate will remain stubbornly high for longer than previously thought, the governor of the Bank of England has said.
Sir Mervyn King now expects inflation, currently 2.7%, to rise to at least 3% by the summer and to remain above the Bank’s 2% target for two years.
In November he had said that inflation would fall back towards its target in the second half of this year. But the governor also said that “a recovery is in sight”.
Sir Mervyn King, presenting the Bank’s latest Quarterly Inflation Report, 20 years after it issued its first one, said the economy had “cause for optimism”.
“If you like, it is a bit of a self-inflicted goal in terms of the damage done to real take-home pay, perhaps another way of trying to implement fiscal consolidation through moving up the price level,” he said.
In other optimistic news, The Office for National Statistics said on Wednesday that UK workers were earning no more than they were 10 years ago, while a report from the Resolution Foundation think tank warned that it could be another 10 years before living standards return to the levels they were at before the recession.
Mike “Mish” Shedlock