INFLATION “could well reach four per cent by the spring” – according to the Bank of England’s Monetary Policy Committee (MPC) minutes, released yesterday.
The forecast is higher than the rate-setting body predicted just one month earlier, yet interest rates are unlikely to be increased in the short term, after eight of the committee maintained their opposition to a hike.
Andrew Sentance remains the only member proposing a rise in rates, by 0.25 per cent, with Adam Posen the only member to propose more quantitative easing.
Yet the MPC is more hawkish than before, according to the minutes, released yesterday, from its meeting in early December.
The minutes hint that even the seven of the nine members who voted to hold policy steady now believe inflation may endure. Its medium-term target for annual prices rises is two per cent.
The minutes said that “most” of those MPC members who thought the current policy stance appropriate “considered that the accumulation of news over recent months had probably shifted the balance of risks to inflation in the medium term upwards”.
This marks a subtle shift from November’s minutes, in which only some MPC members thought risks to inflation expectations had risen.
The minutes said MPC members were ready to act if the balance of risks changed significantly.