Inflation Down, Growth Up - Says Brown

Today saw the Chancellor announce his Pre-Budget report.  Most of the media attention has focused on the dearth of ‘green‘ measures - a mark perhaps of the changing political landscape, following the Stearn Report on climate change.  Of more immediate interest to the economy, however, was the Chancellor‘s belief that he expects inflation to fall back to the government‘s 2% target by mid-2007.

We have reported in recent editions of Minerva about the fears that inflation is on the rise.  Clearly the Bank of England (BoE) thought so when it raised interest rates in November.  If inflation, as measured by the Consumer Price Index (CPI), does fall back from it‘s current 2.4% (Source: National Statistics Office Online, 07/12/06) it will add some justification to the BoE‘s prompt raising of rates in August and November.  Whether the economy will also continue to grow in the 2.75% to 3.00% range that the Chancellor has also predicted remains to be seen: this is, after all, an upwards revision from 2.50%.