The Bank of England’s latest Inflation Report was certainly a downbeat document. Mervyn King, Bank governor, said there are “difficult times ahead”, because the economy is still undergoing a slow adjustment to the impact of the financial crisis. By reducing its GDP growth forecasts while simultaneously increasing its inflation projections, the Bank has signalled that it believes the UK is now facing a series of supply side problems – and those are always the most difficult for any central bank to handle. Read more
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