Tuesday, June 17, 2008

Inflation Hits 3.3%

The UK inflation rate hit 3.3% in May, the highest since 1997 when the index began 11 years ago.

Bank of England Governor, Mervyn King, must now write a letter to the government explaining why the rate is more than 1% above the 2% target. This is only the second time that he has had to do this.

The pressure is now on the Bank to raise interest rates to curb inflation, despite the fact that the UK economy is teetering on the brink of recession.

The solution to this dilemma is for the Bank's target limit of inflation to be raised in the short term, to allow a soft landing of the economy.

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