Inflation to fall sharply next year
October 7, 2008
According to government officials the soaring level of inflation is likely to drop sharply next year, and this could result in falling interest rates, which will come as good news to those with loans and mortgages. Some industry officials have predicted that once inflation starts to fall next year interest rates could plummet to as low as 3.5%. At present the base rate stands at 5%, and has remained at this level for the past five months, as the Monetary Policy Committee tries to keep a lid on soaring inflation.
The CBI is urging the Bank of England to consider cutting interest rates by 0.5% in November, which would be the first rate cut of this level since just after the terrorist attacks in New York in 2001. However, other officials have said that homeowners are likely to have to wait longer than this because of the state of the global financial markets.
One economist stated: ‘It is a very tight call. Much will depend on just how deep and extended the current financial market turmoil is, and what impact it has on the wider economy.’
The Bank of England has already warned that inflation, which currently stands at 4.7%, is likely to soar to 5% before the year is out, but will then start to fall in the New Year. Rising inflation levels have been blamed on a number of factors, such as soaring prices on food, petrol, and energy usage.
The Chancellor of the Exchequer, Alistair Darling, has said that it is important that workers in both the public and private sector are not given huge pay rises to combat this, stating: ‘Otherwise, every penny in pay rises will be swallowed up by higher prices and we will all remember the job losses that followed in the past once inflation takes a grip.’
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- Interest rates kept on hold for moment Following the most recent Monetary Policy Committee meeting the Bank of England has announced that it will be keeping interest rates stable at 5.75% for the moment, adding that the global credit crunch and the
- Income and outgoings set to cause consumers problems The governor of the Bank of England, Mervyn King, has recently highlighted how below inflation wage rises coupled with soaring food, petrol, and living costs are set to cause many households severe problems over the
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