George Osborne might not be feeling particularly comfortable with today’s August Inflation Report from the Bank of England, as Sir Mervyn King is expected to slash the Bank’s growth forecast for the British economy in 2012 from the 0.8 per cent it predicted in May to close to zero.
This morning’s announcement will also include some mildly good news for households, with the Bank due to predict a 2.1 per cent fall in inflation by the end of the year. This will bring inflation down below the two per cent target, which, as the CBI’s Richard Lambert pointed out on the Today programme, will mean ‘families starting to feel a little less squeezed’. High inflation leaves millions of families on frozen wages poorer as they struggle to afford rising costs.
But one of the solutions to stalling growth that the Bank is expected to pursue is further quantitative easing later in the year. Even if we ignore the fact that this is hardly a solid growth strategy, printing more money will cause inflation to rise again, and increase the cost of living again. Sounds a bit messy, doesn’t it?Tags: Bank of England, Growth, Inflation, Sir Mervyn King, UK politics