Britain: Inflation Pressures Start To Mount

The Bank of England faces a prickly policy dilemma. Amid surging domestic demand, service inflation and hourly earnings are speeding up. But at the same time, manufacturing is getting pounded by sterling's strength, and goods prices aren't rising at all. For now, this unstable combination leaves Britain with a happy result: Moderate 3% growth and tame underlying inflation of 2.2%. The problem is holding it all together.

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