Speaking to the Treasury Select Committee about inflation, Mervyn King, Governor of the Bank of England, warned that the risk it could fall below 2% in the medium term has "increased significantly" in recent weeks. He said this was due to the sharp fall in global oil and commodity prices, and declining consumer demand. UK inflation fell to 4.5% from 5.2% in October. The government wants inflation to be as close as possible to 2%. and Bank of England targets the Consumer Price Index, which excludes the effects of mortgage interest payments. "We will take whatever action is necessary to ensure that inflation is close to target in the medium term," Mr King said.UK interest rates are currently at 3% following a 1.5 percentage point cut at the start of this month, and many economists are forecasting a further cut in interest rates in December. He added that the government's cut in VAT will also help lowe the rate of inflation.
Is there an ideal rate of inflation?
Why is the target set at 2%?
What are the dangers of falling prices?
What is the difference between deflation and disinflation?
No comments:
Post a Comment