The Bank of England deputy governor Paul Tucker has said that price inflation could stay above 3% for the rest of 2012, classing this short-term stubborn resilience as ‘bad news’.
His predication for price inflation includes higher energy prices and the tax changes announced in the Budget last month.
This forecast is in contrast to an earlier forecast from the Bank of England which saw inflation falling below the 2% government target.
It follows the latest inflation figures this week showing the Consumer Prices Index (CPI) measure of price inflation rising from 3.4% to 3.5% in March, after a series of downwards movements in recent months.
If inflation does remain above 3% into the second half of this year, savers will continue to see the erosion of their capital in real terms as interest rates remain low.
Household incomes will also face a continued squeeze with salary rises failing to keep pace with price inflation.
There are no indications at this time that the Bank Rate will move from its historic low of 0.5%.
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