Business
England observes higher inflation peak but plays down threat to economy
The Bank of England (BOE) has raised its outlooks for inflation but echoed its view that the COVID crisis-linked spike in price upswings of recent months does not signify an impending catastrophe for the economy.
Minutes of the latest meeting of the Bank's monetary policy committee (MPC), which left interest rates unchanged at their coronavirus pandemic low of 0.1 per cent, showed expectations for GDP growth in the current second quarter had been revised higher by 1.5 per cent.
But they also revealed that policymakers now expect the headline measure of inflation to exceed 3% "for a temporary period".
The surge in the annual rate of CPI has been led by the reopening of the economy since March with clothing, fuel and hospitality prices driving the charge.
It represents a distortion because the same month last year marked the start of the hibernation for acting as the first UK lockdown was imposed.
A closely-watched survey of purchasing managers showed one measure of inflation hitting a joint-record high.
It left economists and financial markets eagerly eyeing the Bank's update for evidence of a shift in the MPC's main view that the inflation spike is "transitory" - a consequence of the shift in demand compared to a year ago.
The minutes read: "Since May, developments in global GDP growth have been somewhat stronger than anticipated, particularly in advanced economies.
"Global price pressures have picked up further, reflecting strong demand for goods, rising commodity prices, supply-side constraints and transportation bottlenecks and these have started to become apparent in consumer price inflation in some advanced economies.
"Financial market measures of inflation expectations suggest that the near-term strength in inflation is expected to be transitory."
The Bank's statement said: "The Committee's central expectation is that the economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back."
UK Sterling lost almost half a cent against both the dollar and euro after the statement, reflecting the view that the Bank is in no mind to tighten policy and risk harming the economic recovery through higher interest rates.