King warned inflation to go higher

Over recent months the rate of inflation in the UK has spiralled out of control, soaring far higher than the government’s target of 2% and more recently soaring to a record high of 4.4% for July.

Whilst this is worrying for many the governor of the Bank of England, Mervyn King, warned earlier this month that things could get even worse and inflation levels could rocket by the end of the year.

Officials have said that the prediction made by King in his recent speech was one of the gloomiest yet. King said that he had not ruled out recession for the UK and that the nation’s economy was set to come to a halt over the next twelve months.

He also added that inflation levels had been driven up due to the high cost of food and fuel, and said that by the end of this year inflation may have hit 5% or even 6%. Officials have said that this level of stagflation – where growth becomes stagnant and inflation soars – had not been seen in the UK since the early 1990s.

In his speech King said: ‘The adjustment of the UK economy to higher commodity prices and a more realistic pricing of credit will be painful. The next year will be a difficult one with inflation high and output broadly flat…I think with broadly flat output, it’s bound to be the case that there is a possibility of a quarter or two of negative growth.’