Rise in Inflation-Yet Another Economic Crisis

Uncategorized | May 19, 2010 | Share

Recently, a new twist was observed in the economy with the inflation rising to unexpected and unplanned levels. This rise is something even the top economists didnâ€™t see coming their way with retail price inflation rising to 5.3% as seen in the month of April. With the governor of the Bank of England, Marvyn King, insisting that it is a temporary inflation and will soon get stabilized, the forecasting somehow depicts a further rise in the inflation. The inflation rise is the highest ever in the past 20 years crossing a targeted 2% level by the Bank of England. This rise is also the highest jump in the last 17 months. It is in a way very surprising how everything in the economy that goes exactly by plan suddenly tumbles upon such unexpected up-hills.
It is also feared that this erosion might lead to higher levels of unemployment with pensioners being affected by it the maximum. With the pension schemes differing for private and public sectors, it might become an issue for them. This also makes us throw some light upon the pension schemes where the public sectors have an inflation rise in their plans while the private sectors have a fixed defined benefit plan which have never been open to modifications, neither have they ever faced any arguments or oppositions.
One of the factors mentioned for the rise in inflation was the current low value of the pound with rise in the prices of clothing, tobacco and alcohol which added to the customer price index rise. However, the turnaround of the stamp duty holiday, increase in the oil price and the weakness of the sterling did suggest a short-term inflation but on the contrary will leave a long-term impact on the UK economy for which the common people would have to suffer. However, the timing for the inflation seems to be more on the beneficial side as it would boost up the economic recovery and at the same time help in clearing off the tremendous amounts of debts owed by the country.

Michael Taylor