smallbusiness.co.uk: Helping your business think big

The Bank of England cannot do much to fight inflation and policymakers are being forced to ‘sit on their hands’ rather than address the problem, the Centre for Economics and Business Research (CEBR) believes.

Charles Davis, an economist for the group, explains that to tackle inflation the Bank would need to raise interest rates.

However, they are unable to do this while they face the other 'headwind' of the slowing economy and falling house prices, he comments.

Mr Davis remarks: 'Ideally, in that respect [the Bank's monetary policy committee] needs to cut rates, but because inflation is so high there is no way they can do that so they are probably going to be holding rates for the rest of this year while the economy slows.'

Once the global economy has begun to recover, inflationary pressures should have decreased, he adds.

Yesterday figures released by the Office for National Statistics showed consumer price index inflation during July stood at 4.4 per cent - more than double the government's two per cent target.

There are currently no comments on this article