FT Exclusive comment:
The UK’s high inflation rate is not simply the result of “one-off” factors but reflects an overly-loose monetary policy stance that has resulted in rapid growth in nominal spending. An early rise in interest rates is necessary to prevent the overshoot being built into inflationary expectations, which would make an eventual return to target more painful to achieve.
Doves argue that inflation would be close to the target but for indirect tax increases over the past year. This is wrong. January’s figures show that consumer price inflation, excluding indirect taxes, was 2.4 per cent in January. This, moreover, is an underestimate of where inflation would be if tax rates had stayed constant, since it assumes that increases are passed on in full to consumers. A more realistic estimate of tax-adjusted inflation is 2.75 per cent.
http://link.ft.com/r/8P1R88/D40Y1A/11EP1/WL9OWI/18J6I1/E4/h?a1=2011&a2=2&a3=15
Doves argue that inflation would be close to the target but for indirect tax increases over the past year. This is wrong. January’s figures show that consumer price inflation, excluding indirect taxes, was 2.4 per cent in January. This, moreover, is an underestimate of where inflation would be if tax rates had stayed constant, since it assumes that increases are passed on in full to consumers. A more realistic estimate of tax-adjusted inflation is 2.75 per cent.
http://link.ft.com/r/8P1R88/D40Y1A/11EP1/WL9OWI/18J6I1/E4/h?a1=2011&a2=2&a3=15
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