11:21 AM, 24th September 2021, About 4 weeks ago
The Bank of England’s Monetary Policy Committee (MPC) voted unanimously to maintain Bank Rate at 0.1% and by a majority of 7-2 to continue with its existing programme of Quantitative Easing.
CPI inflation was projected to rise temporarily in the near term, to 4% in 2021 Q4, owing largely to developments in energy and goods prices. Conditioned on the market path for interest rates, CPI inflation was expected to fall back to close to the 2% target in the medium term.
However, global inflationary pressures remain strong and may prove to be more persistent than previously forecast, including for the UK.
The unemployment rate fell to 4.6% in the three months to July, slightly below the August Report forecast, while HMRC payroll data shows employee numbers, including furloughed jobs, surpassed their 2019 Q4 level in August.
12 month CPI inflation rose from 2.0% in July to 3.2% in August, compared with the 3.0% figure expected in the August Report. Global cost pressures have continued to affect UK consumer goods prices and the reopening of the economy has led to a further increase in some consumer service prices. UK Households medium-term inflation expectations have now increased.
CPI inflation is expected to rise further in the near term, to slightly above 4% in 2021 Q4, owing largely to developments in energy and goods prices. The material rise in spot and forward wholesale gas prices since the August Report represents an upside risk to the MPC’s inflation projection from April 2022. Most other indicators of cost pressures have remained elevated.
The MPC’s central expectation continues to be that current elevated global cost pressures will prove transitory.
The MPC recognises that there will be occasions when inflation will depart from the target as a result of shocks and disturbances. In the recent unprecedented circumstances, the economy has been subject to very large shocks. Given the lag between changes in monetary policy and their effects on inflation, the Committee, in judging the appropriate policy stance, will as always focus on the medium-term prospects for inflation, rather than factors that are likely to be transient.
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