Bank of England: VAT hike has had an impact
The Bank of England sums up its August inflation report, in which it downgraded 2011 growth forecasts from around 3.4% to around 2.5%:
“The UK recovery is likely to continue, underpinned by the considerable monetary stimulus, further growth in global demand and the past depreciation of sterling. But the risks to growth remain weighted to the downside.
“Spare capacity is likely to persist over the forecast period, although its extent will depend on the strength of demand and the evolution of supply, both of which are uncertain.
“CPI inflation remained well above the 2% target, elevated by temporary effects stemming from higher oil prices, the restoration of the standard rate of VAT to 17.5% and the past depreciation of sterling.
“And the forthcoming increase in the standard rate of VAT to 20% will add to inflation throughout 2011.
