UK inflation
was 0.5% in December, below the Bank’s 2% target. It will
likely fall further, potentially turn negative in the spring, and be close to
zero for the remainder of the year.
What caused the fall in prices:
1. Sharp
falls in food and energy prices. ...this is generally good news for British
households. ..MPC can do little to
offset the effects of recent falls in energy and food prices on headline
inflation.
2. Unemployment has been high
and wage growth muted as well as the remaining degree of slack in the economy,
currently judged to be in the region of ½ per cent.
...In fact, to return inflation to target it
is necessary to eliminate the remaining degree of economic slack. This makes it appropriate to return inflation to
the target as quickly as possible after the effects of energy and food price
movements have abated. In the MPC’s judgment, the appropriate time horizon to do that is within the next two years.
Without any Risk or Responsibility
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