Bank Of England Is Responsible For High U.K. Inflation

By , Guest Blogger

U.K. inflation rose again, from 2.9% to 3.5%. Together with the 3% increase we saw in January 2009, this pushed the cumulative 2 year inflation rate to 6.6%, compared with 2.1% in the euro area and -1.3% in neighboring Ireland.

The Bank of England tries to pretend that it has nothing to do with this, saying the higher inflation rate was due to the reversal of the VAT hike, higher commodity prices and the weak pound.

While the Bank of England may not have caused the VAT hike that is a bad excuse since this hike was a reversal of the previous year's reduction, and inflation stood at 3% even after that cut. The same goes with commodity prices which had fallen significantly in the year to January 2009. Moreover, the Bank of England (like all inflating central banks) is partially responsible for the increase in commodity prices.

Recommended: Could you pass a US citizenship test?

And blaming the weak currency is of course no excuse at all, since they are responsible for that.

For the Gordon Brown government, the high U.K. inflation is good, since it means that in real terms they borrow much more cheaply than almost everyone else, including Germany, despite running a deficit as large as that of Greece relative to GDP. There's nothing like having your own printing press for deficit spending politicians.

View comments on this post

----------

Guest Bloggers are not employed or directed by The Christian Science Monitor and the views expressed are the blogger's own. Submissions are neither edited nor reviewed before they appear on CSMonitor.com. If you have any comments about a blogger, please contact us. To comment on this post, please go to the blogger's site by clicking on the link above.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...