Faced with unexpected inflation, the Bank of England opts to stand still
The Bank of England has decided to maintain its floor rate of 0.1% despite unexpected inflation.
Here, the institution's building in London, September 13, 2021 © Hannah McKay, Reuters
Text by: RFI Follow
1 min
Let inflation slip away or take the risk of stifling the economic recovery after a year and a half of the Covid-19 pandemic?
While central banks are grappling with this dilemma right now, the Bank of England has decided to keep its floor rate.
However, it sees inflation exceeding 4% before the end of the year, ie double its target.
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Admittedly,
inflation
should only “
slightly
” exceed 4%.
But this previous estimate was already double the Bank of England's target.
The United Kingdom, very dependent on gas, has to reckon with
soaring world prices for this energy
.
After a fire at an electrical installation in the south of England, the price of gas even reached a record last week: an increase of 44% since the beginning of September, more than 200% since the start of the year in the country.
And part of this increase can be passed on to the end consumer.
Faced with pressure on prices, two executives of the Bank of England have called for an early end to the asset buyback program.
However, the monetary policy committee believes that the "
rise in prices is temporary
".
And to spare the recovery, he unanimously decided to keep a very low key interest rate: 0.1%.
A less good recovery than anticipated this summer.
The BOE lowered its growth forecast in the third quarter.
According to her, at the end of the quarter, British activity will be 2.5% below its pre-Covid-19 level.
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See also:
The ECB will undoubtedly maintain its massive plan to support the economy
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