Inflation threats played down Go compare with our comparison table

Inflation threats played down

01 July 2010 / by Lois Avery

Inflation is not a threat to the UK economy according to a senior Bank of England official.

Speaking at a conference in London yesterday, Adam Posen, a member of the Bank of England’s Monetary Policy Committee, played down fears that interest rates would need to rise soon in order to offset the effects or rising inflation.

He said that despite inflation sitting at 3.4 per cent, well above the Government’s two per cent target, it was not a worry for the Bank of England.

"A small slow upwards creep in inflation expectations is not worth panicking over, and certainly is not a reason to tighten policy when the forecast argues against so doing. And that kind of creep is indeed what I believe that we are seeing," he said.

The MPC will meet again next week to decide the base rates for this month as well as the UK’s quantitative easing measure. The Bank of England’s base rate has sat at an all time low of 0.5 per cent for the past 17 months so far, with no rise expected for the rest of this year.

In addition to his comments about inflation, Mr Posen also said that he thinks a majority vote in favour of a rate rise at the next meeting of the MPC is unlikely. Instead he suggested that factors outside of the UK would determine how rates change over the coming months.

"If we are fortunate, our present monetary stance, combined with the UK's natural tendency to recover and with sustained global growth outside of Europe, will be sufficient to get the UK to the good outcome," he said.

"In that state of affairs, I would be only too happy to vote for an interest rate increase."

But, Mr Posen added: "I am not as confident that we will get to that favourable situation, and that much of what determines our outlook will take place beyond our borders and certainly beyond the MPC's remit".

Fears about inflation heightened last month when MPC member Andrew Sentence unexpectedly voted for a rate rise, but he did not have the backing of other members. This news boosted Sterling, which has been rising steadily since May.

© Fair Investment Company Ltd

 Product NameISA OptionIncome YieldMore Info
Income Maximiseryes
See Details
More Info >
Seeks to achieve a target yield of 7% to generate a quarterly income, whilst offering the potential for some long-term capital growth. Save 100% on Initial Charges.
Monthly Income Plus Fundyes
See Details
More Info >
Popular monthly income fund that aims to achieve a high level of income whilst seeking to maximise total return through investing in high yielding corporate and Government bonds, together with UK equities. 100% discount on initial charges.
Click here to view latest Fund Facts »
Strategic Bondyes
See Details
More Info >
Investing in higher yielding assets which will include most types of fixed interest securities, this fund aims to deliver a quarterly income to investors. Save up to 97% on Initial Charges.
Invesco Perpetual Corporate Bond Fundyes
See Details
More Info >
This highly popular investment fund aims to achieve a high level of overall return with relative security to capital. Income Paid to you twice yearly. Up to a 100% Discount off the Standard Initial Fund Charge.
Click here to view latest Fund Facts »
Artemis Income Fundyes
See Details
More Info >
One of the leading UK Equity Income Funds. The Fund managers hunt out companies with strong free cash flow and solid balance sheets. Income is paid to you twice yearly. 100% Discount off the Standard Initial Fund Charge.
Click here to view latest Fund Facts »
Invesco Perpetual High Income Fundyes
See Details
More Info >
One of the UK's most popular income funds, the Invesco Perpetual High Income has delivered consistently good long term returns through a variety of market conditions. Income is paid to you twice yearly. Up to a 100% Discount off the Standard Initial Fund Charge.
Click here to view latest Fund Facts »
M&G Corporate Bond Fundyes
See Details
More Info >
The M&G Corporate Bond Fund is a conservative ‘blue chip’ sterling fund that aims to produce a higher return than UK government bonds. Income is Paid to you Quarterly. 100% Discount off the Standard Initial Fund Charge.
Jupiter Merlin Income Portfolioyes
See Details
More Info >
The Jupiter Merlin Income Portfolio fund aims to achieve a high and rising income with some potential for capital growth. Income Distributions are made to you quarterly. 95% Discount off the Standard Initial Charge.
Click here to view latest Fund Facts »
The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.