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BOE's Inflation Battle May Pose Headache for Cameron
purch
Posts: 9,865 Forumite
The Bank of England’s battle with above-target inflation could make life difficult for Prime Minister David Cameron and his plan to cut the record budget deficit.
While economists in Bloomberg News surveys expect the central bank to leave its key interest rate and bond-purchase plan on hold today, a growing number say rising inflation expectations may force it to raise the rate within months. That would put an additional restraint on economic growth just as government cuts start to bite.
All 61 economists surveyed by Bloomberg predict the Bank of England will keep its key rate at a record low of 0.5 percent today. Officials will also leave the bond program at 200 billion pounds ($312 billion), according to all 39 economists in another survey. The median forecast of 44 economists in a separate survey is for the bank to raise its key rate once this year, to 0.75 percent in the fourth quarter.
“I think an interest-rate hike would be a total disaster for the U.K. economy,” Neil Mackinnon, an economist at VTB Capital Inc. in London and a former Treasury official, said in a telephone interview. “The Bank of England trying to improve its credibility could mean the government might lose credibility."
http://www.bloomberg.com/news/2011-01-13/boe-s-inflation-battle-may-pose-headache-for-cameron-on-deficit.html
No wonder they are likely to do nothing.
Way too much at stake. :eek:
While economists in Bloomberg News surveys expect the central bank to leave its key interest rate and bond-purchase plan on hold today, a growing number say rising inflation expectations may force it to raise the rate within months. That would put an additional restraint on economic growth just as government cuts start to bite.
All 61 economists surveyed by Bloomberg predict the Bank of England will keep its key rate at a record low of 0.5 percent today. Officials will also leave the bond program at 200 billion pounds ($312 billion), according to all 39 economists in another survey. The median forecast of 44 economists in a separate survey is for the bank to raise its key rate once this year, to 0.75 percent in the fourth quarter.
“I think an interest-rate hike would be a total disaster for the U.K. economy,” Neil Mackinnon, an economist at VTB Capital Inc. in London and a former Treasury official, said in a telephone interview. “The Bank of England trying to improve its credibility could mean the government might lose credibility."
http://www.bloomberg.com/news/2011-01-13/boe-s-inflation-battle-may-pose-headache-for-cameron-on-deficit.html
No wonder they are likely to do nothing.
Way too much at stake. :eek:
'In nature, there are neither rewards nor punishments - there are Consequences.'
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