INFLATION may stay above 3% during the rest of this year, according to Paul Tucker, a deputy governor of the Bank of England. He said that this was ‘bad news’ since what passed for the Bank’s theory held that with the economy on a downward spiral, inflation would be squeezed out of the system.
Instead there has been a fall in production, at the same time as food and oil prices have gone through the roof.
n fact the Bank’s Monetary Policy Committee (MPC) has had to warn that the UK economy will fall into slump again this year. The MPC said that output may drop in the first six months of this year, after contracting in the last quarter of 2011, pushing the UK into a full blooded slump in production – at the same time as inflation is tending to rise, the worst of all possible worlds.
Deputy Governor Tucker added that he based this updated prediction on higher energy prices and tax increases in the Budget.
The Bank’s previous forecast, now completely discredited, was that the inflation rate would probably fall to the official 2% target by the end of 2012, and that the battle against inflation would be won in 2012.
Tuesday’s official figures from the Office for National Statistics showed a rise in the rate of inflation from 3.4% to 3.5% in March, masking a huge rise in food prices and petrol prices, two of the most basic items of expenditure in all working class and middle class households.
Tucker, speaking to a conference of corporate treasurers in Liverpool, admitted that these figures made him feel ‘uncomfortable’ since ‘easily the Monetary Policy Committee’s biggest judgement in recent years has been that inflation will gradually fall back to the 2% target,’ he told his audience.
Now the ‘short-term’ course of inflation ‘would be a little higher’, at the same time as production is falling.
He was forced to admit: ‘I think inflation might remain above 3% throughout the second quarter of this year, and possibly into the second half of the year.’
Tucker’s position is shared by the MPC as a whole which found that ‘There was a greater chance than before that above-target inflation would persist into the medium term.’
At the same time as inflation is rising and production falling, government and Bank policy has eaten into what savings people have.
The Treasury Committee of MPs said yesterday that ‘The government should explore ways to help pensioners whose retirement income has been undermined by low interest rates.’
In its report on the Budget, the Treasury Committee said ‘lax monetary policy’ was ‘particularly penalising savers’, meaning that under the regime of Quantitative Easing under which the banks have stopped lending and interest rates have been held at 0.5%, pensioners have been ruined.
The committee found that Quantitative Easing had badly affected pensioners’ annuity returns and that it penalised savers by redistributing money to borrowers.
At the same time the latest unemployment figures show that the number of women taking low paid part-time work has seen unemployment fall by 35,000 to 2.65 million, while the claimant count, the number of the newly unemployed that were able to force their way onto the Jobseekers Allowance rose by 3,600 in March to 1.61 million.
That is the highest claimant count total since October 2009, according to the ONS, which admitted that ‘despite this latest decrease, the level of unemployment is significantly higher than it was a year ago, in fact it is some 170,000 higher than it was at the same point a year ago,’ he said.
The British capitalist economy is collapsing and needs to be put out of its misery by a socialist revolution that will bring in planned production to satisfy people’s needs rather than the current absolute anarchy in production which is dedicated to keeping the bankers and bosses afloat, at the expense of everybody else sinking.