LONDON (MNI) – December inflation data, released earlier today,
justify the decision of the Bank of England Monetary Policy Committee’s
decision not to to raise interest rates in response to the past few
years’ inflation surge, MPC member Adam Posen says.

Speaking at Chatham House, Posen said that the spike in inflation
had been driven by one-off shocks in energy, food and commodity prices
and it would not have been sensible for the MPC to respond to those by
tightening policy since these would eventually fade.

Posen said today’s data show that ‘we are on the path’ that he had
long forecast.

The December data showed CPI was up 4.2% on the year, down from
4.8% in November. This was the largest fall in inflation since April
2009.

The Q4 CPI average was bang-in-line with the Bank of England’s
forecast in its November Inflation Report, for a 4.7% outturn.

As the effect of the hike in VAT drops out of the annual
comparison next year, the Bank of England is forecasting inflation to
fall sharply again in Q1 to 3.4%.

–London newsroom: 4420 7 862 7492; email: dthomas@marketnews.com

[TOPICS: M$B$$$,M$$BE$]