Inflation is set to surpass the psychologically important 4% mark later this week and economists are warning that the continued increase in food and energy costs are likely to push CPI to 5% next month.
Commentators are predicting a rise to 4.1% in August which makes it increasingly difficult for the Bank of England , taksed to keep inflation below 2%, to cut interest rates to stimulate the economy.
It is likley to be a bad news week for the economy since the Governor of the Bank of England – Mervyn King - will give his latest forecasts for the economy in the Bank’s quarterly inflation report on Wednesday shortly after the release of UK unemployment figures, which are expected to show another rise in the claimant count.
Meanwhile the chief executive of the Financial Services Authority (FSA) - Hector Sants - has warned Britain to prepare for a recession on the scale of the early 1990s. More commentators are turning in gloomy forecasts including Richard Lambert, director-general of the CBI, who was quite optimistic three months ago but has now warned his members that the next 12 months will be miserable.
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