Wednesday, January 24, 2007

Forex News: 24.01.2007 BoE: Inflation is not to slow down, as it was expected

The Bank of England published today the minutes of monetary policy Committee meeting of January 11-12, when the rates were unexpectedly increased by 25 points to 5.25%.

As a whole, the economic growth was robust and the the risks of slowing down, especially in the USA, diminished. The data on inflation in Great Brritain was almost up to expectations, but short-term rise may be expected.

The reason for major concern is high asset prices, which can directly press houshold wealth and demand for goods and services. Nevertheless, some members of the Committee doubt that high asset prices can substantially influence nominal economy, for instance, inflation expectations.

The decision to rise interest rates was made on the ground that the inflation rise is still above expectations at the moment, which is connected with unexpected increase of energy costs. Five members of the Committee, who voted for the rate increase, consider that inflation is not to slow down so quickly as it was earlier expected.


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