BoE expects continued rise in inflation

by Gill Montia

Story link: BoE expects continued rise in inflation

In a statement accompanying the announcement of today’s 0.25% cut in the base rate, to 5%, the Bank of England’s Monetary Policy Committee (MPC) said that it expects to see inflation continue to rise.

The Consumer Prices Index measure increased to 2.5% in February, above the Government’s 2% target.

The rise was largely as a result of higher energy and food prices, and an increase in the cost of imported goods.

The Committee said that it needed to balance inflationary risks with the danger that the disruption in the financial markets would cause a slowdown in the economy.

It concluded that “the balance of these risks to the inflation outlook in the medium term justifies a cut in Bank Rate this month”.

The statement described the availability of credit “worsening” and pointed out that while recent falls in the value in sterling will support net exports, “prospects for output growth abroad have deteriorated”.

Referring to the UK, the statement acknowledges signs that “growth has begun to moderate”, indicating that “a margin of spare capacity … should help to keep domestic inflationary pressures in check in the medium term”.

Full minutes of today’s MPC meeting will be available on Wednesday 23rd April.