Inflation report signals growing split on MPC

THE Bank of England’s quarterly inflation report yesterday revealed a widening divergence of views as governor Mervyn King admitted that the Monetary Policy Committee (MPC) was caught up in a “vigorous debate” about policy.

The report stated that “there is a wider than usual range of views among committee members” as the Bank pushed back projections on the timeframe by which the consumer price index (CPI) would fall below its two per cent target.

In a sign of the uncertainty gripping the MPC, its report stated that the chances of inflation being above-target by the end of 2013 were fifty-fifty. It now seems certain that any decision on monetary policy will be heavily reliant on data releases.

BGC Partners’ David Buik said that the report signalled a monetary policy of “suck it and see”, with IHS Global Insight’s Howard Archer agreeing that the Bank “remains perched on the monetary policy fence”.

The Institute of Directors’ Graeme Leach said: “Uncertainty is written all over this report and rightly so. There are so many competing forces towards sustained recovery or recession, the economic models are overwhelmed. This is a time for judgement.”