Today’s decision to leave base rates at an emergency 0.5 per cent — the lowest since the Bank of England was founded in 1694 — shows how Britain is running out of options. Not even Mervyn King would deny that Britain has an inflation problem: global prices may be up, but the UK seems to have been hit worse than almost any major economy, as I blogged yesterday. With food prices up by 6.3 per cent and CPI inflation by 4.1 per cent, what’s happening to prices? The below graph, again out today from a FTSE350 survey, suggests that pay is up by just 0.5 per cent in the private sector. And it’s even worse in the manufacturing sector.
You could argue that one should not compound this pain by jacking up debt interest.
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