Tuesday, 10 August 2010
Dilemma for the bank
But this spike in food and petrol prices is set to hit all household budgets in the next few months.
But that's not all. Thanks to the last budget VAT will rise to 20 per cent on the 4 January hitting all households, but particularly the poor, hard. it is estimated that it will add over 1 per cent to the cost of living. Increasing costs will also mean less purchases and still further pressure on those that provide these goods and services
Now all this is going to pose a real dilemma to the Bank of England when it sets interest rates as it will tomorrow. Should it raise interest rates from the current low of 0.5 per cent to stop inflation but in doing so put the kibe-wash on any economic recovery.
If these things come to pass and all the indications are that they will, is the Chancellor not being particularly fool hardy in taking out his axe to public spending and public service jobs. Jobs that we in Wales are particularly dependent on.
A monetary and fiscal squeeze together would seem to be a squeeze too far.
Unless there is a real rethink we face a deep downturn and at the same time much higher inflation. A recipe for real disaster particularly here in Wales. So think again Mr Cameron and Mr Clegg before it is to late.