ITEM Club comments on today's MPC decision

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s MPC decision:

  • This decision had always looked likely given the recent minutes and speeches by Committee members
  • The Bank now seems to be increasingly concerned about high inflation in the UK 
  • Eurozone crisis continues to pose a significant risk to the UK and we would urge the Bank to ensure contingency plans are in place

“This decision had always looked likely, given that recent minutes and speeches by Committee members had sought to downplay the chances of any additional QE. Last week’s GDP figures could have thrown a spanner in the works, but the Committee has a history of disregarding these early estimates and are likely to have been reassured by the fact that most other indicators have been much stronger since the start of the year.
 
“Meanwhile, the Bank seems to be increasingly concerned about high inflation in the UK, especially with escalating tensions in the Middle East threatening to keep oil prices elevated for a prolonged period. This probably lowers the chances of any monetary policy easing in the coming months.
 
“Although we agree that the ONS figures look suspiciously downbeat, especially in light of the much stronger business surveys, they have the potential of depressing confidence and having negative knock-on effects on growth in the coming months. Moreover, with the Eurozone crisis posing a significant risk to the UK, we would urge the Bank to have contingency plans in place, in the event that things take a turn for the worse.”