British households have enough to have low morale. According to estimates published by the National Statistics Office, Tuesday, 18 January, inflation in Britain was much stronger than expected in December to 3.7% (against 2.2% for the euro area ). More bad news when the UK is undergoing a drastic austerity measures.The British economy is far from fully recovered. But analysts say the figure could force the Bank of England (BoE) to raise its rates faster than expected, the risk of breaking the recovery. For months and months that the price increase exceeds the threshold limit of 2% set by the monetary authority.
Even the Conservative Prime Minister, David Cameron is beginning to worry aloud a trend "worrying". Especially that "inflation is likely to accelerate further as to exceed the 4% mark under the effect of the VAT hike," said Laurent Bilke, an economist at Nomura Bank in London. The VAT rate was increased from 17.5% to 20% on January 4, under the austerity plan adopted by the government.
Most economists point out that rising prices in the UK mainly due to specific factors: increase in VAT, then, but soaring oil prices and food prices. Elements on which monetary policy has little control. However, the policy known as "expansionist", established by the BoE in the wake of the crisis to support the activity, likely contributed to the acceleration of inflation.
British Central Bank has lowered its interest rates fall from 5% to 0.5% between October 2008 and March 2009, and turned the printing press. She has injected a total 200 billion pounds (240 billion euros) in the financial system to artificially stimulate demand. Arguing for a recovery too timid, the monetary policy committee refused for now to touch the level of rates.
At its last monthly meeting, Thursday, January 13th, the BoE has again opted for the status quo. But it may be forced to act to avoid losing credibility. "The Bank of England is now in a difficult situation, watched Thursday Howard Archer, economist at IHS Global Insight. She is stuck between the devil of inflation and the anvil of a fragile growth." Faces, in a word, the specter of "stagflation", that deadly combination of economic stagnation and inflation that developed countries experienced in the late 1970s.
Marie de Verges
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