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14/02/2002
Inflation rises but interest rates unchanged
The Bank of England Monetary Policy Committee (MPC) have decided not to raise interest rates at its monthly meeting, despite inflation warnings from the Office for National Statistics (ONS).
The figures released by the ONS revealed an underlying inflation rate that exceeded the rates anticipated by the Bank of England. For the Bank of England to maintain its target interest base rate of four per cent, inflation was needed to remain fixed at 2.5 per cent. However, that mark was breached as the latest ONS figures showed a 2.6 per cent rate of inflation rate for January. This rise represents a steep upsurge from the December level of 1.9 per cent and it is believed to have derived from a hike in the price of vegetables and higher petrol prices.
Mervyn King of the Bank of England said: "Short-run movements in inflation are normal, monetary policy cannot easily affect them, and the MPC needs to look through them to form a judgment about the degree of inflationary pressures further ahead.
"With the central projection at the two-year horizon marginally below target, but rising, and with the risks on the upside, the MPC decided to keep interest rates unchanged when it met last week. The committee remains vigilant and will continue to set interest rates to keep prospective inflation on track to meet the target of 2.5 per cent."
And at the EEF biennial dinner, the Governor of the Bank of England, Eddie George, sounded a note of optimism on his hopes for the future and said he expected low inflation to continue.
"I am 'cautiously optimistic' that the overseas environment will improve as we move through the year, and that by this time next year we here in the UK will have seen a return to somewhat stronger and better balanced growth, with unemployment not far above its recent lows, and with continuing low inflation. If that is indeed how things turn out, we will have weathered the international storm as well as anyone could reasonably have expected," he said. (GMG)
The figures released by the ONS revealed an underlying inflation rate that exceeded the rates anticipated by the Bank of England. For the Bank of England to maintain its target interest base rate of four per cent, inflation was needed to remain fixed at 2.5 per cent. However, that mark was breached as the latest ONS figures showed a 2.6 per cent rate of inflation rate for January. This rise represents a steep upsurge from the December level of 1.9 per cent and it is believed to have derived from a hike in the price of vegetables and higher petrol prices.
Mervyn King of the Bank of England said: "Short-run movements in inflation are normal, monetary policy cannot easily affect them, and the MPC needs to look through them to form a judgment about the degree of inflationary pressures further ahead.
"With the central projection at the two-year horizon marginally below target, but rising, and with the risks on the upside, the MPC decided to keep interest rates unchanged when it met last week. The committee remains vigilant and will continue to set interest rates to keep prospective inflation on track to meet the target of 2.5 per cent."
And at the EEF biennial dinner, the Governor of the Bank of England, Eddie George, sounded a note of optimism on his hopes for the future and said he expected low inflation to continue.
"I am 'cautiously optimistic' that the overseas environment will improve as we move through the year, and that by this time next year we here in the UK will have seen a return to somewhat stronger and better balanced growth, with unemployment not far above its recent lows, and with continuing low inflation. If that is indeed how things turn out, we will have weathered the international storm as well as anyone could reasonably have expected," he said. (GMG)
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