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Bank 'should hold base rate despite inflation jump'
General News |
04/02/2010
Despite the high level of inflation, interest rates should be frozen at their current level of 0.5 per cent, the Centre for Economics and Business Research (CEBR) has claimed.
The Bank of England's Monetary Policy Committee (MPC) has met this week to discuss potential changes to fiscal policy in light of a one per cent increase to the Consumer Price Index inflation.
Some analysts have called for an increase in the base rate to combat this phenomenon, but CEBR senior economist Charles Davis disagrees.
He believes high inflation was inevitable this month in light of the return of VAT to 17.5 per cent, but this is likely to be merely a short-term problem.
"There is so much spare capacity in the economy at the moment and relatively little pressure from wages, so, with the recovery being at an early stage, we don't think tightening monetary policy would be the right course of action," Mr Davis commented.
The MPC announces its decision at 12:00 GMT today (Thursday February 4th).
Posted by Jon Aspinell
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