UK households set to suffer, warns King
Share
Mervyn King, governor of the Bank of England, has delivered a gloomy forecast for the UK economy saying households face two years of frozen pay and higher costs of living.
Speaking at the University of Exeter last night King warned: “The patience of UK households is likely to be sorely tried over the next couple of years.
“There is little scope for growth in real take-home pay, which may remain weak even as output recovers.
“It is clear that inflation is likely to pick up markedly in the first half of this year, a message reinforced by this morning’s news that CPI inflation reached 2.9% in December.”
King says that the effects of the depreciation of stirling, together with the increase in VAT back to 17.5%, will push inflation above 3%, well clear of the 2% target.
He says that this could be pushed even higher if energy bills and indirect taxes continue to rise.
But he also predicts that this spike in inflation will be temporary, and that inflation should return to target in the medium term.
King also warned that tackling the public deficit would be key in bringing about a savings culture in the UK.
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
Readers' comments (1)
Anonymous | 21 Jan 2010 9:33 am
Do you remember that time when Merv said something really positive to make everyone feel good & we all believed things were going to get better?
Me neither.
Unsuitable or offensive? Report this comment