Monday, March 05, 2007
IMF upbeat on UK economic growth
The UK economy will grow by 2.9% this year, the International Monetary Fund (IMF) has forecast.
Describing Britain's economic performance as "impressive", the IMF said it was revising up its 2007 growth projection for the UK from 2.75%.
However, the Washington DC-based institution warned that UK interest rates may have to rise further if wage settlements are not kept under control. Chancellor Gordon Brown, who is widely expected to take over from Prime Minister Tony Blair in the summer, last week imposed a tough pay settlement on public sector workers, with average pay increases rising by just 1.9%.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6421087.stm
The wage bill is part of any firm's costs. A rise in wages will, all other things being equal, push up a firms costs, and this will be passed on to consumers in the form of increased prices. Thus, there is a positive link between wage inflation and price inflation. A rise in inflation will trigger interest rate rises by the central bank, which will reduce economic growth. By imposing harsh wage discipline on the public sector, the Chancellor hopes to send a signal to the private sector to also show wage restraint.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 7 and 16 at principles and intermediate level, respectively, describe the workings of the labour market, in particular the link between wage and price inflation. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The UK economy will grow by 2.9% this year, the International Monetary Fund (IMF) has forecast.
Describing Britain's economic performance as "impressive", the IMF said it was revising up its 2007 growth projection for the UK from 2.75%.
However, the Washington DC-based institution warned that UK interest rates may have to rise further if wage settlements are not kept under control. Chancellor Gordon Brown, who is widely expected to take over from Prime Minister Tony Blair in the summer, last week imposed a tough pay settlement on public sector workers, with average pay increases rising by just 1.9%.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6421087.stm
The wage bill is part of any firm's costs. A rise in wages will, all other things being equal, push up a firms costs, and this will be passed on to consumers in the form of increased prices. Thus, there is a positive link between wage inflation and price inflation. A rise in inflation will trigger interest rate rises by the central bank, which will reduce economic growth. By imposing harsh wage discipline on the public sector, the Chancellor hopes to send a signal to the private sector to also show wage restraint.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 7 and 16 at principles and intermediate level, respectively, describe the workings of the labour market, in particular the link between wage and price inflation. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
# posted by Sam @ 17:35 
