BoE sees British inflation below target in 2yrs
Güncelleme Tarihi:
British inflation will fall below the central bank's 2 percent target in two years if interest rates are held at 5 percent, according to new Bank of England forecasts that leave the door open for a rate cut soon.
The BoE's quarterly Inflation Report on Wednesday showed the CPI rate spiking close to 5 percent before falling back dramatically as the effects of higher food and fuel prices wane and the economy grinds to a standstill over the next year.
Its central forecast is for inflation to stand just below the 2 percent target if rates move in line with the market yield curve. This assumes borrowing costs staying almost flat around the current 5 percent over the next year. Risks to the inflation forecast are on the upside.
Most analysts expect the BoE to hold off from cutting interest rates for the next few months while inflation -- which hit a series-high of 4.4 percent in July -- remains so far above target.
But the latest forecasts showing inflation below 2 percent in two years are likely to boost expectations that a rate cut could come sooner than that.
The BoE sees GDP "broadly flat over the next year or so." It then picks up quickly to a rate of around 2.4 percent in two years. This was a lower profile than that predicted in May and the BoE said risks remained on the downside.
"The housing market is weaker and credit supply conditions are tightened by more than was assumed in May," the BoE said.