Surprise as BoE ups inflation forecast (Article by Will Roberts in Mortgage Solutions on 15.02.2012)

15 Feb

The Bank of England has raised its inflation forecast for two years’ time to around 1.8%, more than some economists had predicted.

Its quarterly inflation report will likely dampen expectations of further quantitative easing (QE).

Before Wednesday’s report, a number of economists had forecast a further extension of QE in May, and on average had seen inflation at around 1.6%, up from 1.3% from November’s report.

Last week the Bank’s Monetary Policy Committee voted for another £50bn of quantitative easing over the next three months, taking the total to £325bn.

The Bank said growth will be sluggish in the short term with the eurozone crisis posing the biggest threat to Britain’s economic recovery.

Inflation hit a three-year high of 5.2% in September, but by last month it had eased to 3.6% after a hike in VAT at the start of last year fell out of the annual comparison.

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