A recent survey by Bloomberg News has revealed that the median of 39 forecasts indicated that inflation is likely to reach 3.2 percent which will be the highest rate since 1997.
As a result of this trend, analysts are signalling that Bank of England Governor, Mervyn King, may have to write to the Chancellor to explain the situation and why interest rates may not be enough to fend off inflation and avoid a recession.
According to the forecasts from the Confederation of British Industry, the economy is heading for its worst performance since 1992 and the battle Mervyn King faces fighting off record food and fuel prices and the faltering economy, simply cannot be ignored.
The Monetary Policy Committee has acknowledged the fact that the above-target inflation could create a high medium-term inflation expectation, as well as future inflationary pressures.
This has affected consumer confidence, as well as having political implications as support for Prime Minister Gordon Brown’s Labour government, is at its lowest ebb since polling began in 1943.
In a recent poll by YouGov Plc, 73 percent of people surveyed said that their financial position will worsen over the course of the year.