Wednesday, February 14, 2007

Forex News: 14.02.2007 BoE: Inflation will be volatile

At the meeting of BoE Monetary Policy Committee in January the kea rate was left at the same level 5.25%, because the inflation is expected to slow down at the medium term, though at the near term inflation is likely to be rather volatile. BoE says it in its quarterly inflation report, released today.

As a whole, inflation risks are appreciated as balanced, but there are uncertainties. Some of them are connected with behavior of wages and prices in conditions of robust demand growth and abrupt fall of companies’ costs (excluding wages).

The report says that the perspective of inflation is uncertain as in November, when the last inflation projection was made. In the nearest future, inflation pressure may reflect retail prices for gas and electricity. In December inflation was 3% (above the target) and reflected high gas, electricity and food prices.

Thus, the inflation pressures may be strong in the near term, but fall abruptly in the medium term reflecting the drop in gas and electricity prices.

UK GDP increased by 0.8% for the forth quarter, as a result of strong growth in services sector and slowing down in manufacturing and energy sectors. The surveys show that in the first quarter of the year GDP will reveal robust growth.


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