Bank of England report cites uncertainty about inflation

The Bank of England has implied that it will hike interest rates at least one more time this year in order to keep inflation from rising in a report that says inflation will likely continue to remain above the government target of 2 percent if rates remain at the current level of 5.25 percent. Analysts believe that the rate will go up again, but some believe that the increase will not come until May, at least partly because new figures show that average earnings rose lest than expected in the fourth quarter of 2006.

The Bank’s report, which was released a day after new data showed that inflation was at 2.7 percent in January, lower than had been expected. In the report, however, the Bank emphasized that just because inflation did not go up as much as had been anticipated, it does not mean that there is no danger for further inflation. It emphasized that uncertainties remain, and that it stands ready to do whatever is necessary to make sure that inflation does not get out of hand.

The report said that the Bank expects economic growth to peak at 3 percent, probably around the middle of the year, but that it will likely fall back to around 2.8 percent after that.

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