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Blog Posted in avatar   Kev Hedges's Blog

UK Inflation rises to highest levels in 20 years

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By Kev Hedges
Posted Mar 22, 2011 in Politics
February Inflation figures
The cost of living has risen sharply again this month in the UK. Figures released this morning reveal the Consumer Price Index (CPI) rate of inflation soared to 4.4 percent, that's up from 4.0 percent in January.
This figure is the highest since October 2008. Economists were hoping and expecting a rise of no more than 4.3 percent. The Bank of England's target incidentally is still 2.0 percent, a figure now laughably unachieved.
These high inflation rates will force the Bank of England to raise interest rates, which have been stuck at a historically low 0.5 percent for a fully two years now. A hike in interest rates, more than likely to 0.75 percent would mean all those on mortgages would see a rise in interest on their standard variable rates and tracker mortgages. This would undoubtedly heap more financial misery on the British economy and spending power.
The rate of inflation that includes mortgage payments, rose to 5.5 percent from 5.1 percent in January, its highest level for 20 years, and also ahead of expectations of 5.3%.
February 2011 Petrol Prices
Petrol = £1.29 per litre
Diesel = £1.34 per litre
The cost today (late March 2011) shows petrol prices are already £1.34 per litre and diesel now stands at £1.40 per litre. The Arab unrest has undoubtedly contributed to this. To give you some idea of how far rises on the forecourt have come - just take a look at the cost of petrol and diesel below for a year ago
March 2010 Petrol Prices
Petrol = £1.17 per litre
Diesel = £1.18 per litre
If you think these figures are eye-watering then just watch this space throughout the rest of this year for more hard economic figures.
Growth
Economic growth for the last quarter of 2010 (October, November and December 2010) was -0.6 percent. If growth is negative again for the first quarter of 2011, which ends on Thursday week, we will be back in recession or a "double-dip recession".
Economist Prediction
RBS chief economist Ross Walker:
I think for the next two or three months we will see further upside pressure, most obviously at the petrol pumps. But once we get into the second half of the year we should be seeing at the very least a levelling out in inflation and a slight drift downwards.
Then we'll probably see quite a large fall in the early part of 2012 once this year's VAT hike drops out. So there will be some relief - but not just yet.
We shall be looking again around November this year at the above statement Mr Walker - if that's OK with you.

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