View more on these topics

Inflation to rise to 5%, warns BoE

Inflation will remain above the Government’s 2 per cent target for at least 12 months and is likely to rise to 5 per cent this year while interest rates look set to stay on hold until 2013.

The latest figures from the Office for National Statistics show inflation stood at 4.2 per cent in June, after falling from 4.5 per cent in May.
In the Bank’s August’s inflation report, published last week, the monetary policy committee says inflation is likely to rise in the coming months before falling back in 2012 and 2013.

It says: “There is a good chance that inflation will reach 5 per cent later this year, boosted by utility price rises, and reflecting the continuing impact from past increases in VAT and in oil and other import prices.”

The bank cut its growth forecast from 1.8 per cent to around 1.5 per cent, due to the eurozone debt crisis and the threat to US economic growth.

John Charcol senior technical manager Ray Boulger says: “It looks like base rate will not go up until 2013 here. Bearing in mind the MPC has got two remits – to keep inflation to target and the other to facilitate employment in the general economic scenario – and the bank obviously feels it is able to keep base rate where it is and achieve this.”

Capital Economics senior UK economist Vicky Redwood says: “The MPC’s growth forecasts still look optimistic to us, particularly in light of the further market volatility seen since the committee signed off the report last week.

“Accordingly, we still think that keeping interest rates low will not be enough to generate a strong recovery and more quantitative easing will be necessary.”

Recommended

Halifax pulls equity-release alternative home scheme

Halifax has withdrawn its retirement home plan which was marketed as an alternative to equity release and aimed at people over 65. An equity-release balance increases over time while the retirement home plan stayed at the same balance, with only interest payments having to be met each month. The maximum amount that can be raised […]

2

Negative reports hit pensions

People are being turned off saving by the negative publicity that continues to dog pensions, leading advisers to raise concerns about the effects of “sensationalist” research such as the recent Consumer Focus report. A British Population Survey of 1,002 people, conducted in December 2010 on behalf of Alan Steel Asset Management, found that around 26 […]

Pressure point

Markets are feeling distinctly uncomfortable at present. Running the agreement on the US debt ceiling to the wire hardly helped but the ongoing eurozone sovereign debt crisis has been adding to the angst. Then you have the growing belief that the US will slip back into recession. Shares are finding few friends right now. There […]

India Election Update

What a difference six months makes. Speaking in September last year, we had warned of ‘excessive pessimism’ afflicting the market’s perception of India. Since then, responsible central bank policy from the Reserve Bank of India (RBI), alongside improving global growth, has meant that India’s macro environment is strengthening quickly. The current account deficit has shrunk, inflation is falling and the government has embarked on a heavy dose of much needed fiscal consolidation. As a result, the rupee has been one of the strongest global currencies this year while the market has touched all-time highs, rallying by more than 20 per cent (GBP) since September. This begs the question: are we now in a period of ‘irrational exuberance’? Not yet.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. And the problem is that the BoE can’t put the brakes on inflation by raising interest rates because to do so would cause a meltdown of the housing and mortgage markets. When will we ever see an end to Crash Gordon’s legacy of endless borrowing, both public and private, towards a mirage of prosperity that never really existed and never could?

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com