Friday 18 September 2015

the UK economy is relatively stable but lacks potentials to grow in the future.

In August, the UK inflation rate was pushed back to zero by the slide in fuel costs. Furthermore, breakfast costs in the UK also fell. There is almost no signal of underlying inflationary pressure. Is this a good thing to the UK? It is good for many people that zero inflation rate means they will have no pressure from the increasing living costs. However, it signals the lack of demands and consumption. Moreover, the low inflation rate will lead to an appreciation of GBP in real terms. The government budget is tight and the interest rate is already low. The UK government and central bank has few tools to stimulate the economy. Currently, the UK economy is relatively stable but lacks  potentials to grow in the future.

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