The Bank of England Monetary Policy Committee (MPC) has yet again met to set the UK’s monetary policy to deliver inflation targets set by government with a key area for managing inflation being to set the Bank of England’s base rate.
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Comment
Inflation is way above its target. We have suggested before and we repeat our belief that the Bank of England will follow the Federal Reserve in the USA in that 'the Fed' stated that it will "not use interest rates to control inflation for the foreseeable future" and we will likely only see two interest rates increases towards the end of 2023 where they are forecast to increase from 0.1%pa to 0.6%pa.
Mirrored interest rate policy with the USA presents stables exchange rate for £:$ which bodes well as trade deals between UK and US. In addition, whilst higher inflation is not good for the economy it is great for public sector debt e.g. devaluing covid-19 debts before they are due to be repaid say in 10, 15 or 20 years.
We suggest you watch our video: 70 Yrs of RPI answering how inflation has trended after economic shocks over the last 70 years.
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