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BoE warned: Monetary conditions

  • 16 November 2010

Speaking on the back of the unexpected rise in Consumer Price Index inflation to 3.2% in October, Ward, who had pencilled in a possible rise to between 3.3% and 3.4% against the expected 3.1% predicted by analysts, said he still expects CPI inflation to rise to about 4% by early 2011.

The shock rise in inflation automatically forced another explanatory letter from Bank of England governor Mervyn King to the chancellor,explaining yet again why inflation has remained more than 1% above target.

Ward says: "Governor King's latest exculpatory letter was accepted uncritically by a Chancellor keen to leave the door wide open to "QE2".

"The "temporary shocks" defence, however, is wearing thin. Commodity price gains are partly a reflection of a secular rise in demand for raw materials from emerging economies, a trend the MPC has consistently ignored.

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