But at the end of last year, many forecasters were predicting that U.K. Inflation would have passed three per cent by now. That it hasn't, appears to illustrate how globally, there is still a shortage of demand relative to potential output. This even appears to be the case in the US and UK where unemployment is so modest.Households will feel the pinch, inflation is now almost certainly greater than the increase in wages, meaning real wages are probably falling. This is not good for retail but was wholly expected.
As for interest rates, when the Bank of England's rate-setting committee last met, one member, Kristine Forbes voted for a hike. But according to the minutes, none of the other members of the nine-strong committee plan to vote for a rise in interest rates anytime soon, unless inflation surprises on the upside. Well, it didn't, and as result, the odds of an increase in interest rates later this year are lengthening.
