VAT Inflation could pop the recovery bubble

Published on January 21, 2011 by Crawfords Accounting

The Bank of England have been warned by top UK economists and politicians that increasing interest rates too quickly in an attempt to reduce inflation and assist people on saving, could have a detrimental effect on the economy. There could be a double whammy of extensive job losses and rising mortgages at the same time if this warning is not heeded.

Liberal Democrat Treasury spokesman Lord Oakeshott said, “With economic recovery picking up pace throughout the world, there will be upward interest rate pressure. It is vital we do not let that damage the economic recovery here.”

Interest rates were held at 0.5% last week but it is speculated that pressure will mount on the Bank of England’s monetary policy committee to raise interest rates to over 1% in the coming months to balance inflation. This will be bad news for the eight million households who have tracker mortgages. There is also concern that the generally supportive middle England, could turn against the government’s spending cuts, when they have to wave goodbye to previously low borrowing costs.

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