U.K. Economy May Slow as Inflation Accelerates, NIESR Says
Britain's economy will grow slower than forecast this year, and inflation will accelerate, the National Institute of Economic and Social Research said.
The London-based research group, whose clients include the Bank of England and the Treasury, cut its prediction for economic expansion to 2 percent from the 2.2 percent it forecast in October. The inflation rate will reach as high as 2.6 percent, instead of staying close to the central bank's 2 percent target as previously expected, Niesr said.
Bank of England Governor Mervyn King said last week that inflation may match the highest in a decade this year. The comments suggested that policy makers, due to cut interest rates next week, face a dilemma as they consider further reducing interest rates to spur economic growth paydayloans.
“Monetary policy is not able to affect this near-term inflationary pressure much, but higher inflation would make a looser monetary policy more difficult to put in place,'' Ehsan Khoman and Simon Kirby, research officers at Niesr, said in the report today.
The group predicted that the government budget deficit will rise to the most since the fiscal year ending in March 2005.
“Spending is broadly on track for the year,'' Kirby said in a briefing to reporters. “It's the weakness of the receipts that's the problem for the government.''
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