–BOE: CPI Around 1.4% in 2yrs Time on Market Rates; stg200 bln QE
–BOE: CPI Seen Around 1.6% in 2yrs on Unchanged Rates
–BOE: Medium Term CPI risks “broadly balanced” at End Forecast
–BOE: CPI more likely below than above 2.0% in 2nd half f’cast
–BOE: On Flat Rates Risks Around CPI Target Balanced at 2yrs
–BOE MPC at Aug NMeting: Inflation Outlook Highly uncertain
–BOE MPC at Aug Meeting: Ready to Respond “In Either direction”
By David Robinson and David Thomas
LONDON (MNI) – The Bank of England’s August Inflation Report shows
inflation has already peaked, but will remain well above its 2.0% target
in 2011 before heading down to end well below it the target in two
years’ time.
At the August meeting, the BOE’s Monetary Policy Committee said the
“prospects for inflation were highly uncertain” and they were “ready to
respond in either direction” as the balance of risks evolves.
The August Inflation Report’s modal projections, on implied market
rates, show inflation on track to fall back to the 2.0% target by the
end of 2011 and then to move well below it in 2012 and to stay under
target through into 2013.
On market rates, CPI is shown around 1.4% in two years time and
around 1.6% on unchanged Bank Rate.
Even on flat rates, with Bank Rate stuck at its record low 0.5%,
the BOE said the balance of risks around the 2.0% target were broadly
balanced two years ahead.
On the face of it, the BOE’s projections would support unchanged
policy for the foreseeable. The text of the report, however, and the
brief summary of the August meeting in the report, highlight the
uncertainty surrounding the outlook. The Inflation Report also records
there was a range of views among MPC members over the outlook.
The two year ahead modal CPI projection was pretty much in line
with analysts’ expectations and not greatly changed from May. The BOE
predicted that inflation was likely to remain above 2.0% for longer than
judged likely in May “in large part reflecting the increase in VAT to
20% in 2011″.
The BOE said that after that the margin of spare capacity would
bring inflation back below target for a period although it said “it
cannot be sure of the extent to which inflation will moderate.”
The growth forecast showed GDP accelerating in the near term to
around the 3.0% on the year by mid 2011 and holding around this level
through 2012 and into 2013.
–London newsroom: 4420 7862 7499 e-mail: drobinson@marketnews.com
[TOPICS: M$B$$$,M$$BE$,MABPR$,MT$$$$]