Hi, need to submit a 2000 words paper on the topic Factors That Contribute to the Inflation Level.

Hi, need to submit a 2000 words paper on the topic Factors That Contribute to the Inflation Level. The CPI level according to the report in question at the given time is 1.1% and is expected to shoot up to 2%, the government’s aim is to keep the CPI level between 1-2%, that is why the bank of England in its latest meeting has decided not to tamper with the interest rate at this point of time because they run the risk of going above or below the inflation level target that they have set themselves. It is necessary to maintain the CPI level in this range only because a lot of financial calculations are based on the interest rate level and it is imperative that it is kept within this range or else the whole economy could be damaged quite considerably and the repercussions would have to be faced for a very long time. (Flemming (1976)).

The demand level was going up as the world economy overall showed signs of positive growth but still had some considerable amount of recovery to make to get back to the pre-financial crisis level, households were still hesitant in spending lavishly as the economy has not fully recovered from the initial shock. Due to this decrease in consumption, the companies have also decreased their level of spending on capital by almost 10%, this is one of the reasons why the interest rates cannot be increased in the economy right now as this would lead to a further reduction in capital expenditures by the company and have even more adverse effects on the economy and would also contribute to further slumping and more unemployment.

The gross domestic product is basically the total produce of the economy in monetary value terms, the report suggests that in the 3Q of this year the GDP fell by around 0.4%, there is a need to push the economy out of the recession and the decreasing GDP is not a good sign for the economy at all. The interest rates were kept constant to promote capital expenditure and they were expected to reach 200 billion pounds through capital financing for companies through the bank.