John Major yesterday reaffirmed the Government's commitment to low inflation in a speech to central bankers at the International Monetary Conference. He said: 'Inflation is a form of theft practised by government on the people.' Current low inflation was, he added, a source of great personal satisfaction.
The OECD report, due to be published in the middle of July, shows that growth for this year has been shaved slightly from a 2.9 per cent rate predicted in December. But the expansion for 1995 is up sharply from an originally estimated 2.9 per cent.
The Treasury has been forecasting a 2.5 per cent growth rate for 1994. The unpublished June forecast now in preparation is likely to put growth in the same range as the OECD predicts.
The organisation says record levels of consumption will be maintained as consumers draw down savings to offset the tax increases. Higher net exports and a resumption of investment growth will also support the expansion.
The underlying inflation rate, currently 2.3 per cent, is predicted to stay within the Government's
1-4 per cent target range this year and in 1995. This is partly explained by an improving productivity picture.
The OECD will argue that recovery is being buttressed by better supply-side performance, helped by some of the reforms of the 1980s.
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