Bank of England raises inflation forecast
The Bank of England has raised its inflation forecast for two years time to around 1.8 per cent, higher than most economists had expected. The move raises doubts about further quantitative easing.
Last week the Bank’s Monetary Policy Committee voted for another £50bn of quantitative easing over the next three months, taking the total to £325bn.
Most economists had expected a further extension of quantitative easing in May, and on average had seen an inflation forecast of around 1.6 per cent.
The latest projections are therefore likely to dampen expectations for further stimulus.
Inflation hit a three-year high of 5.2 per cent in September, but by last month it had eased to 3.6 per cent.
“Inflation is likely to fall further,” the report said. “But the extent to which inflation will decline and the likely pace of that moderation remain uncertain.”
“GDP growth in the UK is likely to remain weak in the near term, before gradually strengthening as households’ real incomes recover, supported by continued stimulus from monetary policy. But the drag on domestic spending from tight credit conditions and the fiscal consolidation is likely to persist.”