–Says Big Risks Presently Come From Rest Of World
–Global Growth Moderation Reduces Risk Of Major Rises In Comms, Energy
LONDON (MNI) – The big risks facing the UK economy presently come
from the rest of the world and the Monetary Policy Committee can respond
to those risks by using Bank Rate or further asset purchases, Bank of
England Governor Mervyn King writes.
In a letter to Chancellor of the Exchequer George Osborne following
news that CPI inflation was again over 4% y/y in July, King said:
“The big risks currently facing the UK economy come from the rest
of the world. In responding to those risks or indeed to other isks in
either direction, the MPC can use Bank Rate or asset purchases to
achieve its objective”.
In other key comments, King noted that there have been “significant
movements in financial asset and energy prices since the time of that
(MPC’s August) meeting.”
“The Committee will continue to monitor those developments closely
and will consider their implications for the inflation outlook at its
meeting in September”.
While the governor noted that there remained upside risks to
inflation, the key one being that a period of above target inflation
could push up on inflation expectations and lead to pay increases.
He continued, saying that the global growth slowdown should stop
further major rises in commodity prices:
“Inflation will continue to be sensitive to fluctuations in global
commodity and trade prices, but recent evidence of a moderation in
global growth suggests that the risks of significant increases in those
prices has diminished somewhat”.
–London newsroom: 4420 7862 7492 email: dthomas@marketnews.com
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