Britain’s Budget Office Forecasts Inflation To Outpace Income Growth
London, England, United Kingdom (AHN) – Britain’s Office for Budget Responsibility warned Monday that the country’s inflation rate would likely outpace income growth over the next two years.
The OBR forecasts 2011 inflation rate at 2.8 percent, while average earnings will rise by only 2.2 percent. The higher Consumer Price Index outlook is based on significant increases in food prices and household energy bills since summer.
However, by 2012 the OBR foresees a slight improvement in the financial situation with inflation likely slowing to 1.9 percent, while average earnings would rise by 2.4 percent.
Despite the bleak OBR outlook, Chancellor George Osborne said the British coalition government would still go ahead with spending cuts, tax hikes and austerity measures that would have an impact on economic recovery if export weakens and unemployment rises faster than expected.
Osborne is still optimistic that Britain can avoid a double-dip recession in 2011 and achieve a growth rate of 1.8 percent this year. He told MPs that while there is uncertainty, Britain’s recovery is on track and 1 million jobs are still expected to be created by the private sector as a result of the recovery.
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