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November 10, 2010    

Bank of England unveils Quarterly Inflation Report

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by Kay Murchie

Presenting today’s Quarterly Inflation Report, the Bank of England’s Governor, Mervyn King, said inflation will continue to stay high, while the economy will remain weak.

The report stated that inflation will remain stubbornly high, as a result of the rising price of raw materials, higher energy bills and the decision to hike VAT to 20% next year will undoubtedly keep inflation higher, said the Bank.

The tax hike, coupled with spending cuts, is expected to hamper growth, said the report as consumer spending will undoubtedly slow.

However, no hints were given with regard to interest rates, or whether the Bank would restart its quantitative easing programme.

The last few rate-setting meetings have seen policymakers disagree in terms of interest rates and QE.

Policymaker Andrew Sentance has, at the last four rate-setting meetings, voted for the base rate to be lifted and he recently warned that the Bank faces losing its credibility if it is not seen to be fighting inflation – which at 3.1% has been above the 2% target for ten consecutive months.

Today’s inflation report said: “Given the quantitative importance of the different influences buffeting the economy at present, it is hard to judge how inflation will evolve in the medium term and there are sizable risks in both directions.”

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