Is BoE Any Closer to Raising Interest Rates?

Sep 13 14:09 2017 Print This Article

What’s More Important to the BoE, Inflation or the Economy?

The Bank of England faces a dilemma when it meets on Thursday between getting inflation in check and supporting the flagging post-Brexit economy.

With the central bank significantly overshooting its 2% inflation target – CPI rose to 2.9% in August – the answer may appear simple but with policy makers divided, that is clearly not the case.

The depreciation of sterling has played a major role in the inflation rise over the last year and with the currency having bottomed last October, it is plausible that once the base effects drop out of the annual comparison, inflation will fall closer to target. But can policy makers rely on that?

Uncertainty Reigns

As we can see from recent voting, there is a growing belief that this cannot be relied upon. The important question therefore becomes, will enough policy makers decide they can’t rely on it before the data starts to correct itself?

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