UK Inflation Rate Reaches 4.5%

A trip to the local supermarket these days is an ever increasing headache. From one day to the next basic food items might have gone up in price by as much as £0.20. When every penny counts and family budgets are stretched to the limit, news of supermarkets’ excessive profits aren’t reasons to be cheerful either.

Will the UK bank rate rise again? Will the pound devalue further against other currencies? At present it looks as if the Bank of England is a long way off from raising interest rates again and is more likely to print more money, and rumour has it among industry experts that a rate rise is not expected to happen before late 2014 or in early 2015.

It may be good news that interest rates remain at their current levels and the cost of borrowing is not going up for consumers, but it is bad news for those, who rely on their savings to supplement their meagre pensions.  So far the recovery has been weak, almost non-existent with a current growth rate for the economy standing at just 0.2%.

With high unemployment – especially among young people – and frozen salaries, there’s little chance of a speedy recovery or indeed a change in interest rate. The danger is that the fear of rising inflation will increase bad tempers over pay freezes and will spark a demand for larger pay rises. This in turn could send inflation spiralling out of control, particularly with the UK’s obsession to pay astronomically large bonuses and salaries to “city fat cats”, who have yet to show that they’re actually worth a penny, let alone their fat bonuses.

With the inflation being at 4.5% already, many households are forced to dip into their savings – or worse – rely on their UK credit cards to stretch their monthly budgets. Utility companies, greedy as ever, have warned of large price increases this autumn and winter. As a result, many UK citizens are looking to leave the UK for pastures new – those who can do so, are unlikely to return, taking their skills, savings and tax payments elsewhere to boost the economy of another country.

Is the UK a lost cause? Current inflation and unemployment rates are suggesting just that – and without confidence in the efficiency, credibility and trustworthiness of banks, there’s little chance of anyone believing governmental speeches that the UK isn’t nearly as badly off as its neighbours Ireland, Spain or Portugal for example.

Many UK citizens believe that banks have so far been able to disguise their worst excesses and that further revelations over mismanagement and downright foolhardiness are yet to surface.

Even if this is not the case, banks aren’t helping UK citizens to regain trust in the banking sector – the original culprit who caused this whole inflationary misery. Without lending to small and medium sized businesses the economy has simply ground to a halt, leaving only the bankers laughing all the way to the bank – as usual.