Higher Utility Bills to Drive Inflation up to 5%

Seems like the escalating prices are going to drive the inflation this year up to 5% after all. The Governor of the Bank of England, Mervyn King, warns that higher utility bills could push inflation to 5% later this year. This once again demonstrates the fact that there’s a great deal of uncertainty surrounding the outlook of inflation. The main forces for such a gloomy outlook is based on the assumption that gas prices may rise 15%, electricity prices by 10% this winter and ever rising food prices.

The bank has also downgraded its forecast for gross domestic product in 2011 to around 1.75%, from around 2% in February. This is mainly due to the adverse effects of high energy costs and weak consumer spending. However, the Bank still expects inflation to fall back in 2012 and 2013.

Source, bbc.co.uk

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