Tuesday, 10 August 2010

Dilemma for the bank

All is not well with the economy when the cost of chips in the Caerffili high street goes up a staggering 14% from 70p last week to 80p now. Now in the great scheme of things that might not sound very much but when not working for ITV it is part of my staple diet. If measured along the other staples like tea, butter fruit and fish,  and of course diesel. All  point to things not looking  too good for the Hughes household budget for a while.
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.

1 comment:

  1. Oh! That it should come to this!
    The Hughes family budget slashed to the point where further portions of fish and chips now seem unlikely!
    Little wonder then, that the bucket and spade outing, which awaited Gareth, in his blog on 27th July had to be cut short after only seven days, when Gareth had to return to his desk in order that the family should go hungry no longer!
    Seriously though...one has to wonder whether the crisis, which appeared to be on the run, with the appearance of 'Green Shoots', has in fact only been delayed, surely to return as an even bigger disaster, and perhaps sooner than any of us might have imagined.