Inflation threats played down
01 July 2010 / by Lois Avery
Inflation is not a threat to the UK economy according to a senior Bank of England official.
Speaking at a conference in London yesterday, Adam Posen, a member of the Bank of England’s Monetary Policy Committee, played down fears that interest rates would need to rise soon in order to offset the effects or rising inflation.
He said that despite inflation sitting at 3.4 per cent, well above the Government’s two per cent target, it was not a worry for the Bank of England.
“A small slow upwards creep in inflation expectations is not worth panicking over, and certainly is not a reason to tighten policy when the forecast argues against so doing. And that kind of creep is indeed what I believe that we are seeing,” he said.
The MPC will meet again next week to decide the base rates for this month as well as the UK’s quantitative easing measure. The Bank of England’s base rate has sat at an all time low of 0.5 per cent for the past 17 months so far, with no rise expected for the rest of this year.
In addition to his comments about inflation, Mr Posen also said that he thinks a majority vote in favour of a rate rise at the next meeting of the MPC is unlikely. Instead he suggested that factors outside of the UK would determine how rates change over the coming months.
“If we are fortunate, our present monetary stance, combined with the UK’s natural tendency to recover and with sustained global growth outside of Europe, will be sufficient to get the UK to the good outcome,” he said.
“In that state of affairs, I would be only too happy to vote for an interest rate increase.”
But, Mr Posen added: “I am not as confident that we will get to that favourable situation, and that much of what determines our outlook will take place beyond our borders and certainly beyond the MPC’s remit”.
Fears about inflation heightened last month when MPC member Andrew Sentence unexpectedly voted for a rate rise, but he did not have the backing of other members. This news boosted Sterling, which has been rising steadily since May.
© Fair Investment Company Ltd
| Product Name | ISA Option | Income Yield | More Info | |
|---|---|---|---|---|
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Investec FTSE 100 Income Deposit Plan |  |
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| Product Name | ISA Option | Maximum Potential Return | Term | More Info | |
|---|---|---|---|---|---|
|
FTSE 100 Enhanced Kick Out Plan | |
10% per annum |
Up to 6 years |
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| Structured investment plan with the potential to mature after years 1, 2, 3, 4, 5 or 6. If the plan matures early it will return 10% times the number of years the plan has been in force. Also available for Stocks & Shares ISA and ISA transfer. | |||||
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FTSE 100 Kick Out Deposit Plan | |
6% per annum |
Up to 6 years |
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| Capital protected deposit plan with the potential to mature after years 3, 4, 5 and 6. If the plan matures early it will return 5% times the number of years the plan has been in force. Also available for Cash ISA and ISA transfer. | |||||
The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.
| Service | ISA Option | Minimum Investment | More Info | |
|---|---|---|---|---|
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Share Trading Account Plus | |
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| Trade in a wide variety of investment options including International Equities, Warrants and Covered Warrants. Frequent traders get a reduced rate of £8.95 | ||||
The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.
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