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Inflation To Remain 'Sticky' As Economy Continues To Adjust

on 13 December 2012.

Spencer Dale, chief economist of the Bank of England said that inflation in the UK market is expected to remain ‘sticky’ around the 2% mark for the near future.
 
He says that inflation is expected to remain near the 2% target or higher, as the UK economy continues to make necessary adjustments due to the global and domestic economic down-turn.
 
He commented further that the UK economy is ‘still adjusting to the new realities’ of a global economic crisis. As part of this crisis, there is weakness in productivity and depreciation of the sterling. This also impacts a rise in commodity and household goods prices, as well as a rise in VAT. As a result more households are worse off as money does not go as far.
 
Real wages have also dropped by 15% however this is partly a result of higher inflation created by the current changes in the economy.
 
If inflation is to stay around the 2% mark as expected, this may have the impact of keeping current mortgage rates relatively low, which may work out positively for the housing market.

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