first_img KCS-content Tags: NULL FURTHER rises in food prices could cause annual inflation to accelerate to four per cent and endanger the government’s plans to hike VAT to 20 per cent in January, a leading City economist has warned. Henderson’s chief economist Simon Ward said that recent rises in global food commodity prices may boost annual CPI food inflation to seven per cent by late 2010 from just 1.7 per cent in June. A further increase to 10 per cent would imply annual headline inflation running at four per cent, double the Bank of England’s inflation target. “Such an increase would hit consumer spending and recovery prospects by squeezing real income and money supply expansion. It would also risk destabilising inflationary expectations, particularly if the Monetary Policy Committee (MPC) were thought likely to respond to renewed economic weakness by restarting asset purchases,” he added. “This could warrant postponing or cancelling the coming VAT hike,” Ward cautioned. He said the better-than-expected public sector borrowing numbers could justify cancelling the VAT rise, thereby cutting one percentage point off headline inflation.However, a Treasury spokesman insisted the VAT hike is here to stay, arguing that controlling inflation is a matter for the Bank of England and its monetary policy tools.Other economists have also expressed concern about the impact of rising food prices on the outlook for inflation. Barclays Capital recently raised its forecasts for CPI and RPI inflation based on food prices. Show Comments ▼ Food inflation could derail VAT increase More From Our Partners Police Capture Elusive Tiger Poacher After 20 Years of Pursuing the Huntergoodnewsnetwork.orgBiden received funds from top Russia lobbyist before Nord Stream 2 giveawaynypost.comNative American Tribe Gets Back Sacred Island Taken 160 Years Agogoodnewsnetwork.orgA ProPublica investigation has caused outrage in the U.S. this weekvaluewalk.comBrave 7-Year-old Boy Swims an Hour to Rescue His Dad and Little Sistergoodnewsnetwork.orgRussell Wilson, AOC among many voicing support for Naomi Osakacbsnews.comKiller drone ‘hunted down a human target’ without being told tonypost.comAstounding Fossil Discovery in California After Man Looks Closelygoodnewsnetwork.orgFlorida woman allegedly crashes children’s birthday party, rapes teennypost.comMark Eaton, former NBA All-Star, dead at 64nypost.comSupermodel Anne Vyalitsyna claims income drop, pushes for child supportnypost.comKamala Harris keeps list of reporters who don’t ‘understand’ her: reportnypost.com980-foot skyscraper sways in China, prompting panic and evacuationsnypost.comConnecticut man dies after crashing Harley into live bearnypost.comWhy people are finding dryer sheets in their mailboxesnypost.comInside Ashton Kutcher and Mila Kunis’ not-so-average farmhouse estatenypost.comUK teen died on school trip after teachers allegedly refused her pleasnypost.comI blew off Adam Sandler 22 years ago — and it’s my biggest Sunday 12 September 2010 11:26 pm Share whatsapp whatsapplast_img

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