Mervyn King : "Inflation may not fall back as strong as expected"

Graham_Devon

Not that anyone should worry, not likely anything is going to actually be done about it.

Report states that King expects higher inflation and lower growth.

http://www.bbc.co.uk/news/business-13357282

The governor of the Bank of England, Mervyn King, has warned that higher utility bills could push inflation to 5% later this year.

Publishing the Bank's latest Inflation Report, he said there remained strong downward pressures on economic growth and upward pressures on inflation.

However, he said that the "big picture" had not changed much since the last report in February.

The Bank still expects inflation to fall back in 2012 and 2013.
The Bank said the slightly gloomier outlook for economic growth reflected not just the dampening effects of high energy costs but also "very weak" consumer spending.

It downgraded its expectations for gross domestic product in 2011 to around 1.75%, from around 2% in February.

Thrugelmir

Graham_Devon wrote: »

Not that anyone should worry, not likely anything is going to actually be done about it.

As the inflation in the pipeline is coming from imported product what can be done about controlling the impact?

Heyman_2

What would you like done about it, a rise in interest rates perchance?

Graham_Devon

Thrugelmir wrote: »

As the inflation in the pipeline is coming from imported product what can be done about controlling the impact?

What I would like to know, is howcome the EU can start acting on this imported inflation, yet we, cannot?

Thrugelmir

Graham_Devon wrote: »

What I would like to know, is howcome the EU can start acting on this imported inflation, yet we, cannot?

The ECB's remit is to control inflation over the whole of the EuroZone. So a one size fits all approach has to be adopted. At 1.25% far from a normal base rate.

Not sure what relevance this has to the UK's specific economic issues though.

Really2

Thrugelmir wrote: »

Not sure what relevance this has to the UK's specific economic issues though.

It hasn't it is just another point of BOE base rate "rescuing" home owners and people desire to ratchet up the base rate even though disposable income is shrinking (and would so further if you put the base rate up).

All in the name of hopeful defaults.


Every inflation thread done by some seems to ignore the fact a big part of the BOE's remit is as you rightly put the economy.

Even in this article he goes on about slow growth, so surely that indicates why they are not likely to move rates quickly just to target inflation.

1984ReturnsForReal_2

IE Gas & Electric going up so don't expect the quarter on quarter figures to fall.

By the way, increasing interest rates will have no effect or a detrimental effect

Graham_Devon

Just incase anyone wanted to apply a slur about desperately wanting defaults to occur because I post up a news item...

The pound leapt across the board on Wednesday after the Bank of England's quarterly inflation report led to renewed hope for an interest rate rise in 2011.

Sterling was up 0.80% against the dollar at 1.6496 and 0.92% against a depressed euro at 1.1462.

Meanwhile, the single currency was suffering against all major counterparts as European authorities began a summit in Greece to discuss the possibility of increasing bail-out funds for the eurozone nation.

The pound's strength came after Bank of England governor Mervyn King took an uncommonly hawkish stance in his speech on inflation expectations.

Usually-dovish King said his May inflation forecasts were based on the assumption that interest rates will rise to 0.8% in the fourth quarter of 2011 and to 1% in the early part of 2012. The Bank has upped its near-term inflation expectations to around 5% due to the impact of surging energy prices.

And...

King acknowledged the base rate could not be kept at its current record low of 0.5% forever, but would not give any further indication of when a policy move is likely to be enacted.

abaxas

I find the unexpectedness of this unexpected to be fully unexpected by even those who expected.

pinkteapot

Colleague just summed it up - "It could be worse, we could be Greece."

chucky

Is this yet another thread wanting rates to go up... zzzzzzzzzzzzzzz

Inflation isn't exactly priority at the moment, the state of the economy is probably that bit more important at the moment...