UK Inflation Puts Pressure on Bank to Act

An increase in inflation to 4.8 percent from 4.7 percent in December has ramped up pressure on the Bank of England to raise interest rates to ease price increases. According to the Office for National Statistics, sharp hikes in air transport, fuel, utilities, and food prices were the main reasons for the uptick in inflation. The Value-Added Tax (VAT) increase from 17.5 percent to 20 percent also contributed to the rise in inflation.

The other factor to consider is the impact of the massive government spending cuts scheduled to take place over the next two years. Some analysts expect this will reduce growth to within a more manageable range without the need to resort to interest rate hikes.

Source: BBC News

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