Friday, May 16, 2008
Utterly twisted logic!
Consumers will be "crucified" unless the government changes its inflation target, a leading economist has warned. Peter Spencer from the influential Ernst & Young Item Club is urging ministers to change the 2% inflation target used by the Bank of England. He warned that interest rates would have to stay at 5% if inflation is to be brought down to 2%. He added that keeping interest rates at their current level would hurt hard-pressed households. With annual inflation at 3%, the Bank has little room to cut borrowing. March's 0.8% monthly rise in consumer prices was the steepest for nearly seven years. He called for the Bank of England's remit to change so it focused on "core inflation", a measure that excludes food and energy prices and is used in the US.