According to Insight Trading, inflation in the United Kingdom has fallen back to target for the first time in four years.
Tokyo, Japan., March 2, 2014 - (PressReleasePoint) - Insight Trading: After 4 years spent significantly above the Bank of England’s target, inflation in the United Kingdom has returned to 2% and, in doing so, has effectively given the central bank carte blanche to keep interest rates low and secure the country’s economic recovery.
Britain’s ONS – Office for National Statistics – said that CPI or core inflation fell to 2% from 2.1% last month and ended a 4 year period in which it reached as high as 5% when the pound sterling was at its weakest during the depths of the recession.
“Inflation returning to target is definitely a feather in the Chancellor of the Exchequer, George Osborne’s cap but the jury is out on how long the rate is likely to remain within the desired range,” said an Insight Trading researcher.
“We think the BoE may be inclined to allow the pound to strengthen since the government’s bid to rebalance the economy towards greater reliance on exports rather than consumerism has essentially bombed,” he continued
Despite the good news, Insight Trading says it remains skeptical of the UK’s recovery citing that it is being fueled by a reinvigorated credit boom linked closely to the real estate market which has experienced a renaissance thanks to the government’s “Help to Buy” scheme.
“One also has to bear in mind that the real rate of inflation in the UK is far higher than the official data suggests but this is the case in every advanced economy. Policymakers strip more and more items out of their calculations in order to keep the official rate low but if all those items are factored in to the calculations, inflation would be significantly higher than the governments would have us believe,” concluded the Insight Trading researcher.
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