Bank of England says inflation may rise above 3%
The Bank of England has stated that prices are rising faster than expected and that inflation may rise to more than 3% in the next few months, but added that this issue is “temporary” and should not affect monetary policy.
Before the Bank of England’s announcement on Thursday, data showed that inflation was rising much faster than previously expected because the economic rebound was stronger than expected.
The Bank of England’s Monetary Policy Committee insisted on its unusually accommodative policy, suggesting that it needs to wait for inflation to subside rather than take action.
The Monetary Policy Committee stated in the minutes of the meeting: “The Committee’s core expectation is that the economy will experience a brief period of strong GDP growth and higher-than-target CPI inflation, after which growth and inflation will fall back,” and inflation faces upward and downward risks.
It stated that inflation will rise further from the 2.1% recorded in May and “may exceed 3% in the short term”.
After the central bank made a policy decision, the price of British government bonds rose and the pound fell. The pound fell 0.3% against the dollar to 1.3918 US dollars, and fell 0.5% against the euro to 1.1651 euros. The 10-year Treasury bond yield fell by 0.03 percentage points to 0.75%.
The committee unanimously voted to maintain interest rates at 0.1% and maintain the current asset purchase plan at a ratio of 8 to 1 until the end of the year, which will increase the total amount of quantitative easing to 895 billion pounds.
At the last meeting before leaving the Bank of England, chief economist Andy Haldane voted against a majority vote for the second time in a row, seeking to limit the total amount of quantitative easing to 845 billion pounds.