Bank of England inflation predictions


The rate of inflation will stay high says Bank of England.

The Bank of England’s quarterly outlook shows that economy will remain weak next year.

Inflation will remain high in 2011, according to the Bank of England’s quarterly inflation outlook.

The rise of the price of raw materials, higher energy bills and next year’s VAT hike have been outlined as the reasons for the poor outlook, which predicts that the rate of inflation will stay above 2%.

Governor Mervyn King said the outlook remained uncertain due to the risk of low consumer spending, mounting debt and higher taxes. However, he added that the recovery would still continue although it would heavily rely on global developments.

Mr King, said: “The biggest conjunctural risk we face is from bad news from the world economy and in particular the euro area. The world economy is facing difficult and dangerous times. I hope the G20 meeting this weekend will have a cooperative message rather than those we’ve been getting in the last few months and weeks”.

He did not indicate whether more money would be injected into the economy through the process of Quantitative Easing but made a point of highlighting the importance of the world’s countries working together for a common goal. “If we fail to recognise that there is a genuine collective interest then it will be lose-lose and every country will be worse off”, said Mr King.

Jeremy Cook, chief economist at World First, said: “The “wait and see” monetary policy approach is still firmly in place and we will have to wait for further economic releases to signal whether the recovery is faltering and further QE is needed”.