World Bank of England warns inflation may rise to 10-year high in coming months
Euro area - prices rise as for ten years,
for years, the euro managers at the European Central Bank (ECB) have worked on their desired goal two percent inflation. Now she is here: © Martin Meissner / Copyright 2021 The Associated Press. All rights reserved. The price increase rate in the euro area continued to increase in August and reached the highest value for almost ten years. Consumer prices rose by 3.0 percent compared to the previous year, so the statistics office Eurostat on Tuesday in Luxembourg.
The Bank of England has warned inflation will increase further this year to double its target rate, but insisted rising prices will only be temporary as it kept interest rates on hold.
The monetary policy committee (MPC) also kept in place measures to bolster the economy, despite some calls for them to be cut to cool cost pressures.
Latest economic forecasts fromshow it expects inflation to peak at 4% in 2021 - a 10-year high - against a previous prediction of 2.5%.
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Although twice the government-set target, the Bank said it would be "transitory" and inflation will return to 2% in the medium term.
Although the MPC voted unanimously to hold rates at 0.1%, one member, Michael Saunders, voted to cut its £895bn bond-buying quantitative easing (QE) programme by £45bn in the face of concerns about hikes in inflation, but was outvoted by seven to one.
However, the committee said some "modest tightening" of monetary policy is likely to be needed in due course to cool inflation, indicating action may be on the way.
The Bank said: "The committee's central expectation is that current elevated global and domestic cost pressures will prove transitory.
Bank of England sees inflation surging but keeps stimulus
The Bank of England predicted the UK annual inflation rate to continue surging this year as pandemic-hit economies reopen, but kept its record-low interest rate and emergency stimulus intact. As the pandemic erupted in March 2020, the BoE slashed its key interest rate to the current record-low level. It also began pumping massive sums of new cash into the economy.The bank has created £450 billion under its quantitative easing (QE) programme since March last year, when Covid-19 prompted Britain's first coronavirus lockdown.
"Nonetheless, the economy is projected to experience a more pronounced period of above-target inflation in the near term than expected in the May report."
The Bank kept its growth forecast at 7.25% for 2021, as it said gross domestic product (GDP) was set to have risen by a better-than-expected 5% in the second quarter, but will slow to around 3% - weaker than first forecast - in the third quarter.
Video: Bank of England's Bailey says he is confident inflation will return to target (CNBC)
However, the 2021 prediction would still mark the fastest growth since the Second World War.
Its latest set of quarterly forecasts shows it expects the economy to then grow by 6% in 2022 and by 1.5% in 2023, compared to previous forecasts of 5.75% and 1.25% respectively.
The Bank said: "UK GDP (gross domestic product) is projected to recover further over the remainder of the year, reaching its pre-pandemic level in (the fourth quarter of) 2021, with demand growth boosted by a waning impact from COVID.
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"Further out, the pace of GDP growth is expected to slow towards more normal rates, partly reflecting the gradual tightening in the stance of announced fiscal policy."
It added: "Frictions in the labour market are judged likely to dissipate over the forecast period, boosting growth in effective supply capacity.
"There is uncertainty around these judgements, including how the economy will adjust to the end of the furlough scheme."
The Bank's downgrade to third-quarter growth forecasts comes as the Deltavariant impacted spending following a surge in pent-up demand as lockdown restrictions eased.
It said the newstrain and voluntary social distancing could pose a risk to the growth outlook, although it added if recent improvements in new cases continues this might boost GDP prospects.
There had been speculation the Bank could halt QE as the UK's economic recovery spurs on sharp rises in the cost of living.
The Bank's former chief economist Andy Haldane had repeatedly called for a £50bn cut before he left the committee last month.
While a majority voted to leave the economy-boosting measure unchanged, the Bank did outline its approach to removing it when necessary.
It said it would start to unwind QE when the interest rate reaches 0.5%, which is lower than the previous threshold.
Ifo expects the highest inflation rate for almost 30 years .
The Ifo Institute expects 3 percent of the highest increase in consumer prices this year for almost 30 years. © Patrick Pleul / DPA Central Image / DPA An inflation rate of more than 3 percent determined the Federal Statistical Office last 1993. for the coming year prophesy the Munich economists an inflation rate between 2 and 2.5 percent, as the institute announced. That too would be a significantly faster price increase than in the middle of the past ten years.