Last Monday, a credit rating agency threatened to strip Britain of their AAA rating. This was expected because in 2010 S&P (credit rating agency) gave Britain a 'negative outlook', however, they reverted back to stable. There was some positive news because it was announced that inflation fell to 3.6% in January from 4.2% in December. There was more bad news though because unemployment rose to 8.4% in the three months up to December, which is not good news for a country trying to grow. However, there is evidence that there is a trade off between unemployment and inflation in the short run, which suggests that when unemployment is low in an economy, there is a higher rate of inflation (this has not been proved in the long run though).
The best antidote for unemployment is growth, however, times do not look very prosperous when talking about growth. There are some things that will affect future growth, which the Bank of England cannot influence in any way such as Euro-area distress. Mervyn King has said that the MPC has its limits and that if George Osborne wants growth then he must do something about the situation himself
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