BoE Governor Says Slower Growth Will Help to Contain Inflation
BoE Governor King says risks high CPI might spill over into other costs is now greater than it was 3 months ago as inflation is now expected to peak higher than previously expected, and that the MPC is now firmer in its belief that a period of muted growth is required to bring down inflation in line with target. The sharp Sterling depreciation is also underpinning CPI. In his open letter to the Chancellor following today's 4.7% YoY CPI reading, Governor King stated that the MPC is indeed aware that the economic slowdown could push inflation below 2% and that risks to the inflation target are finely balanced, which is why the repo rate has been held steady at 5%. Overall, comments do not suggest that the BoE Governor is looking to slacken monetary policy this year, underpinning our outlook for a steady rate.
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