By TraderVox.com
Tradervox.com (Dublin) – According to Martin Weale, one of the Bank of England’s policy makers, the rate of inflation in UK remains a concern and additional stimulus will add to those concerns. He noted that the pressure on inflation has been exacerbated by the rising consumer-price which exceeds the central bank’s target. Weale predicted that it is very likely that the inflation will remain high in the next two years as the economy struggles to growth. He said that his analysis suggests that more BOE stimulus without corresponding improvement in productivity will add to inflation.
However, Weale’s comments are in contrast with David Miles, a fellow policy maker, who indicated that the central bank can do more if recessionary conditions persist. Such differing comments have led the market to believe there is continued division in the Monetary Policy Committee, which would result to BOE embarking on its bond buying program. The market is waiting to scrutinize BOE meeting minutes which will be released at 9:30 today.
The BOE is also expected to hold it Financial Policy Committee meeting today which is chaired by the BOE Governor Mervyn King. The last meeting held its position that the financial institutions in the country should raise capital to stave off threats facing the financial system. The Bank of England will publish the FPC statement together with the semiannual Finance Stability Report on November 29.
According to Weale’s speech to be delivered at the Manchester Economics Seminar, the Bank of England risks losing its credibility due to prolonged high inflation levels which are above the BOE target of 2 percent. Report from the UK has indicated that consumer Price growth rose by 2.7 percent in October. The central bank has also raised its short-term inflation forecast.
David Miles, a fellow policy maker, had indicated earlier in an interview that UK economy may require additional stimulus. He also added that it will depend on how the headwinds holding back growth plays out. Today’s MPC meeting minutes will show how the policy makers voted to avoid additional stimulus.
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