Another week and an other Bank of England target is reached. Last month UK inflation breached the Bank’s own 2% target with a CPI (consumer price index) of 1.9%. There were worries that high utilities prices would push inflation above the 2% mark and force the new governor to write his first letter to the Chancellor explaining the reasons behind the rate was above 2%.
For the first time we can not immediately link this with an imminent rise in UK interest rates due to the reassurances given last week that rates would not be going up any time soon.
In other UK news the Scottish Nationalists suffered a double blow this week as all three major political parties ruled out entering into a currency union with an independent Scotland and the European commissioner José Manuel Barroso said that Scotland would not be entitled to automatic entry to the Union and any application to join could be “difficult, if not impossible.”
This will mean various things to the UK economy as businesses trading between the two nations would be in different currencies, the newly independent Scottish central bank would hold large amounts of British Sterling in reserve and North Sea Oil companies would need to decide where to base themselves for the most security.