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Think tank: inflation could hit 8%
Interest rates may have to rise to 8% to combat rampant inflation, according to an influential think tank.
The Policy Exchange believe that a double-dip recession is likely. This would be followed by an economic boom, which the government would need to respond to by printing mote money.
This, coupled with the planned deep government spending cuts, would lead to the fastest economic growth rate since the late 1980s.
"Once the economy gets growing sustainably, there will be a huge expansion in the money supply, which will lead to inflation. Once inflation rises, interest rates will rise rapidly as well. Since interest rate rises will raise mortgage rates, the initial effect will be even more inflation," said Doctor Lilico of the Policy Exchange.
Inflation has been at a historic low of 0.5% for the past 16 months and at the last meeting of the Bank of England's Monetary Policy Committee only one member suggested a rise in rates to 0.75%.
Post Date: August 23rd, 2010
The Policy Exchange believe that a double-dip recession is likely. This would be followed by an economic boom, which the government would need to respond to by printing mote money.
This, coupled with the planned deep government spending cuts, would lead to the fastest economic growth rate since the late 1980s.
"Once the economy gets growing sustainably, there will be a huge expansion in the money supply, which will lead to inflation. Once inflation rises, interest rates will rise rapidly as well. Since interest rate rises will raise mortgage rates, the initial effect will be even more inflation," said Doctor Lilico of the Policy Exchange.
Inflation has been at a historic low of 0.5% for the past 16 months and at the last meeting of the Bank of England's Monetary Policy Committee only one member suggested a rise in rates to 0.75%.
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Post Date: August 23rd, 2010
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